The Revised Shareholder Rights Directive (SRD II) is due to become effective in all EU Member States by 10 June 2019. Ireland, along with several other Member States, has yet to publish the necessary legislation to bring SRD II into national law; however, Irish authorities continue to expect to meet the deadline of 10 June. With this date fast approaching and in the absence of any transitional provisions under the Directive, SRD II transposing legislation is expected to apply immediately upon publication.
As a result of Ireland’s decision to exercise the discretion afforded Member States under the 2007 SRD I, listed UCITS and AIFs companies (“Funds”) (as investee companies) were exempted under Irish law from the requirements of SRD I. While SRD II retains the discretion for Member States to exempt listed Fund companies from the provisions relating to obligations of investee companies, other obligations will apply.
SRD II means the introduction, for Funds and Fund Managers, of requirements for enhanced engagement with investee companies (i.e. EU companies listed on a regulated market (as defined in MiFID) in which they invest), the incorporation of shareholder engagement into investment strategies and disclosure of how such strategies benefit the medium to long-term performance of investors.
If the Irish legislation, as is expected, exempts listed Funds from the investee company obligation provisions of SRD II, then the only SRD II requirements applicable to Funds and Fund Managers, in their capacity as shareholders of companies listed on a regulated market, will be the relevant transparency provisions contained in Chapter 1b of SRD II. These are:
- a requirement to adopt, or explain if it is determined not to adopt, a policy describing the Funds’ and Fund Managers’ engagement with the listed companies in which they invest and hold shares; and
- an obligation to make prescribed disclosures to life assurance companies and occupational pension schemes ( called “institutional investors” in SRD II ) invested in the AIF or UCITS.
We have created a more detailed Client Briefing on the impact of SRD II on Funds and Fund Managers. We will of course update you upon the publication of the Irish transposing legislation. If, having reviewed the Briefing, you have any queries in relation to the application of SRD II to your Fund/ Manager or require assistance in determining the appropriateness of having an engagement policy, developing an engagement policy if appropriate, and any related disclosures, please let us know.