EU legislation will bring changes affecting operation of listed companies and investment firms
The main proposals concern the remuneration of management in listed companies and the right of listed companies to obtain information on shareholders. The proposals relate to Finland’s national transposition of the EU directive covering these matters. The Ministry of Finance circulated its working group’s proposals for consultation on Monday 16 April.
The aim of the EU directive is to further the opportunities for shareholder engagement and to enhance transparency between listed companies and investors. This minimum harmonisation directive also seeks to standardise the governance practices of listed companies in different Member States and thus promote the development of uniform capital markets within the European Union.
Improved opportunities for shareholders to have a say on remuneration of management
Listed companies will be required to set out their remuneration policy regarding remuneration of the company’s managing director and the members of its board of directors. The remuneration policy will be determined at a general meeting of shareholders. The working group also proposes that it be possible for a company to derogate temporarily from its remuneration policy if this would facilitate matters in particular situations, such as changes of managing director and corporate restructuring.
A majority of the working group supported the right of a general meeting of shareholders to hold an advisory vote on remuneration practices. A dissenting opinion on this matter was expressed by the Ministry of Finance and the Finnish Shareholders Association.
The new provisions on remuneration would apply to general meetings of shareholders from 2020.
Improvement in listed company's right to obtain information on its shareholders
Listed companies will have improved opportunities to find out information on nominee-registered foreign shareholders if a duty to supply information at the company’s request is imposed on investment firms providing services of safekeeping of shares and on providers of nominee-registration. The listed company itself would be responsible for meeting the cost of collecting such information.
In practice, the right to information would concern only information on foreign shareholders of Finnish listed companies, because information on Finnish investors is already available in central securities depository shareholder registers.
Investment firms would also be required to forward information concerning the exercising of shareholder rights. Such information includes instructions on voting at general meetings of shareholders and investor participation in share issues. Investment firms would have to forward information on the exercising of shareholder rights and on requests for information by listed companies along the chain of intermediaries.
The changes proposed by the working group do not affect the authorities’ access to information on nominee-registered shares or access to this information by individuals.
Changes also to principles of shareholder control and regulation of related party transactions
The shareholder control exercised by asset managers and institutional investors in listed companies will be more effective if investors are required to draw up and publish principles of shareholder engagement.
It is also proposed that a disqualification regulation in the Limited Liability Companies Act be replaced by a regulation on related parties concerning company decision-making. The proposed regulation would concern decision-making by the board of directors, the managing director, the supervisory board and the general meeting of shareholders, not only in listed companies but also in all limited liability companies.
The consultation period ends on 31 May. The draft bill, the request for an opinion and the opinions received will be published on the project site (in Finnish).
Annina Tanhuanpää, Senior Ministerial Adviser, chair of working group, tel. +358 2955 30485, annina.tanhuanpää(at)vm.fi