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Corporate Finance
RiskMetrics Group issues draft policy on notice periods for general meetings of listed companies
RiskMetrics, one of the leading US corporate governance advisers to the institutional investor community, is proposing to adopt a voting recommendation policy which, if followed by investors, would seriously impair the flexibility currently enjoyed by UK listed companies in calling general meetings.
Companies listed on the main market of the London Stock Exchange are now permitted by UK law (following implementation of the EU Shareholder Rights Directive in August 2009) to hold general meetings (other than annual general meetings) on 14 days' notice, provided they have passed a special resolution authorising this at (or since) the company's last AGM and also offer facilities for electronic voting. If these conditions cannot be complied with, 21 days' notice must be given for all meetings of the company. AGMs must, in any event, be called on not less than 21 days' notice – although in practice 28 days is the norm for such meetings due to the requirements of the Combined Code.
RiskMetrics is proposing to adopt a voting policy under which investors will be recommended to vote against authorities sought by UK and European listed companies to hold general meetings on 14 days' notice, unless there is sufficient justification put forward in the shareholders circular seeking such authority. RiskMetrics warn that the circumstances in which such authority would be available should be "exceptional". In the absence of sufficient justification, 21 days' notice should be the norm.
This will be of particular concern to companies with US shareholders, who run the risk of having their authorities voted down if not adequately justified or if RiskMetrics decide the circumstances in which such authority is available are not sufficiently "exceptional".
Shepherd and Wedderburn has joined with a group of leading City law firms in making a submission to RiskMetrics that this policy, if introduced, would be damaging and inappropriate.
There is fortunately no suggestion that leading UK corporate governance bodies are following a similar approach.
The consultation remains open and companies which share our concerns should register their opposition to RiskMetrics proposed policy without delay.
View the RiskMetrics draft policy (webpage).
View the response of certain City of London law firms (3 page pdf).
30 November 2009