A new French decree law was published this week, on December 12, in the "Journal Officiel" and will be fully effective as of Jan 1, 2007. The decree takes into account the recommendations issued by the Autorite Des Marches Financiers (AMF) workgroup --which ISS' French office contributed to.
In spirit, many of these changes are a step in the right direction for improving shareholder rights. However, there may be unintended consequences due to practical implementation and due to the short deadlines of this decree. This decree was expected and brings significant changes to the following areas:
- It introduces a record-date system. The record date must be three days before the general meeting and replaces the blocking shares requirements. As a result, we could see a rise in proxy voting volume and more participation by foreign shareholders who disliked blocking requirements.
However, a record date set so close to the date of the general meeting is an operational challenge that will have to be resolved by the intermediaries. Investors can only hope that, faced with a short two weeks to implement this law, the intermediaries' answer will not be to impose earlier instruction deadlines or blocking of shares at intermediary stages.
- Meeting agendas will be notified 35 days before a meeting instead of the current 30 days before the AGM. This measure will allow ISS to announce meetings and agendas earlier. Time will tell whether this will be accompanied in practice with better and earlier disclosure of data needed to make informed voting decisions.
-Shareholder proposals must be sent at the latest 25 days before the general meeting if the notice is published up to 45 days before the meeting, instead of the current 20 days before the meeting. If the notice is published more than 45 days before the meeting, shareholders need to send their resolutions at the latest 20 days after the publication of the notice. This should give other investors more time to consider shareholder resolutions.
-Shareholders must send written questions to management at least four days before the AGM. This imposes a stricter deadline than before as shareholders could previously send questions within a "reasonable" deadline. This change places the burden back on the shareholders instead of on the representatives.
-Finally, during a takeover period, an EGM can be called with a 15 day notice. In that case, shareholder resolutions must be received 5 days after the publication of the meeting notice. This is a significant change as shareholder meetings could previously not be called during a takeover because an offer period is limited to 25 days, while the minimum notice period for an EGM was 30 days. This caused inconsistencies with the national Breton law on hostile takeovers of French companies, since shareholders could not be consulted on issuance of warrants during a takeover.