The Shareholders Rights Directive (SRD II): what you should know and what you can do  

Written on 11 May 2020

On 28 April 2020, the Belgian Parliament proclaimed an act transposing Directive (EU) 2017/828 - also known as the second Shareholders Rights Directive ("SRD II") - as regards the encouragement of long-term shareholder engagement (the "Law of 28 April 2020").*

SRD II and the Law of 28 April 2020 are mainly relevant for listed companies, institutional investors and/or intermediaries. SRD II aims to encourage long-term shareholder engagement in order to ensure that decisions are made in the best interest of the long-term stability of a company. SRD II contributes to

  1. improving the oversight of directors’ remuneration;
  2. refining regulation on related party transactions;
  3. facilitating shareholder identification and the flow of information between the shareholders and the company and
  4. increasing transparency of institutional investors, proxy advisors and asset managers.

We have prepared practical guidance focussing on the elements of the SRD II that have an immediate impact on Belgian listed companies. Other measures initiated by the SRD II not discussed here apply to institutional investors and/or intermediaries.

Our Corporate experts have prepared a series of analyses to guide you through some of the most salient aspects of this directive. You can click on the titles below to access each insight.

Remuneration report: increased scrutiny required

Although listed companies were already required to draft a remuneration report, the Law of 16 April 2020 further enlarges this requirement, by increasing and the level of detail in which such information must be reported. A thorough analysis of the remuneration types and relevant persons falling under these new reporting obligations is a logical starting point. The new rules with regard to the content of the remuneration report will need to be applied for the first time to the report to be published in 2021. Listed companies must also take into account the interplay of this regulation with the renewed Corporate Governance Code 2020 which applies to most Belgian listed companies as of the financial year starting on or after 1 January 2020.

Remuneration policy: shareholders have say-on-pay

The remuneration policy becomes a formal instrument which must be approved by the shareholders' meeting for the first time when deciding upon the approval of the annual accounts to be published in 2021. The first formal remuneration policy in the meaning of the Law of 28 April 2020 will have a major impact on the future remuneration practices of listed companies. This is in no small part because of the limited leeway for derogations and the far-reaching consequences of not obtaining shareholders' approval on a new or materially revised remuneration policy. Hence, proper understanding and thorough preparation thereof will be key.

Related party transactions

Listed companies are advised to review their internal policies with respect to related party transactions in order to verify if these policies cover the enlarged scope of the definition of "Related Party". They must also set up an internal procedure that monitors on a regular basis whether certain decisions or transactions fall within the "ordinary course of business" exemption. Moreover, listed companies must keep detailed records of each related party transaction, including non-material ones. Also the external reporting policies should be checked to ensure that the material related party transactions are disclosed at the appropriate time and with the content required by Article 7:97 BCCA (without prejudice to any obligations under the market abuse regulation).

Technical amendments to the Belgian Code on Companies and Associations

Nearly one year after the Belgian Code on Companies and Associations (BCCA) entered into force on 1 May 2019, the Belgian legislators used the implementation of the SRD II as an opportunity to fix some inaccuracies and oversights observed during the first year of the BCCA. Whilst some changes are minor and consist of clerical rectifications, others have a clear impact on companies and associations.

*Details here. Directive (EU) 2017/828 in principle had to be implemented into national law in all EU countries by 10 June 2019. Directive (EU) 2017/828 of the European Parliament and of the Council of 17 May 2017 amending Directive 2007/36/EC as regards the encouragement of long-term shareholder engagement OJ L 132, 20.5.2017, p. 1–25 can be accessed here.