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Asset managers, life insurance companies and pension funds: engage or explain

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Pierre Schleimer

Partner

Luxembourg

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Six Jean-Christian
Jean-Christian Six

Partner

Luxembourg

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Yannick Arbaut

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Pecenik Joanna
Joanna Pecenik

Counsel

Luxembourg

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Ingallo Dara
Dara Ingallo

PSL - Senior Associate

Luxembourg

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05 September 2019

New transparency requirements encourage asset managers, life insurance companies and pension funds to focus on the long-term sustainability of EU listed companies.

The financial crisis had shown that many shortcomings in corporate governance of listed companies contributed to the financial crisis. For example, important deficiencies in the engagement and control by shareholders impede good decision-making by companies." The European Commission

On 1 August 2019, the Luxembourg legislator implemented the second shareholder right directive (SRD II) by amending the law of 24 May 2011 relating to the exercise of certain shareholder rights at general meetings of listed companies through the adoption of Bill of Law N° 7402 (as amended, the Shareholder Rights Law).

Do not be misled by the title of the law, the new rules are not only about new rights for shareholders of listed companies but also about obligations for certain types of shareholders, in particular for institutional investors and asset managers (SRD Investors). Indeed, these investors own or manage the majority of shares in EU listed companies and their shareholding behaviour significantly impacts the governance of these entities.

SRD II aims at improving the long-term viability of European listed companies and encouraging shareholder engagement, specifically the engagement of SRD Investors. With that in mind, SRD II introduces on the one hand requirements to ease the identification of shareholders, the transmission of information and the exercise of shareholders rights (in particular in cross-border situations) and on the other hand transparency requirements to foster the stewardship of SRD Investors.

This article will focus on the new requirements applicable on the investors'side. In respect of obligations applying to listed companies, intermediaries and proxy advisors, please refer to our other publication “Second shareholder rights directive: an enhanced framework for shareholder rights in listed companies”.

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