Shareholder democracy provides an investor the ability to actively shape the companies in their portfolio — helping inform board decisions, drive accountability, and ensure their investment voice is recognised across markets. Yet, for many European investors, this potential is too often constrained by complex regulations, inconsistent practices, and technological inefficiencies. The evolving landscape of shareholder rights within the European Union (EU) is characterised by both progressive reforms and ongoing challenges.
With the recent review of the Shareholder Rights Directive (SRD) by the European Securities and Markets Authority (ESMA) and subsequently the Directorate General Justice and Consumers (DG JUST), Europe is at a strategic inflection point. Beyond the technical language and regulatory updates, there remains a clear gap between the vision for harmonised investor engagement and the reality faced by market participants. Achieving true corporate democracy hinges not only on policy, but also on practical solutions that address lack of standardisation at source, fragmented market nuances and processes across jurisdictions.
In our analysis, we explore the EU’s latest findings on shareholder rights, highlighting the persistent challenges impacting both institutional and retail investors alike. From inconsistent legal interpretations to varied market practices and the promise of advanced, interoperable technology, one thing is certain: enabling seamless, meaningful shareholder participation remains a critical area of focus — not only for investors, but for any organisation pursuing transparency and sustainable growth in an increasingly engaged marketplace.
The Shareholders Rights Directive was originally introduced in 2007 with the aim to encourage long-term shareholder engagement. This was followed some 13 years later with the implementation of SRD II in September 2020 that required intermediaries to provide their investor clients with event notifications and the ability to vote. It also empowered issuers with the right to request who owns them via the disclosure process.
As part of an agreed process to review the directive, in January 2025 DG JUST published a report that it commissioned on the application of the SRDs, which followed an earlier report on the implementation and effectiveness of the revised SRD II published by the European Banking Authority (EBA) and ESMA.
The approach on collecting data and information on how the original SRD and SRD II were implemented across the member states consisted of literature reviews, case studies, interviews and consultations with over 100 key industry stakeholders, including Broadridge. Indeed, our representatives met several times with the consultants commissioned by the EU to discuss their insights and share our extensive experience providing SRD-compliant proxy voting and shareholder disclosure solutions to both institutional and retail investors.
The DG JUST report validated the recommendations and conclusions made by the EBA and ESMA that, while wide-ranging progress has been made, opportunities were missed in several areas including insufficient policing by regulators, failure to harmonise the definition of shareholder or define the scope of eligible securities, and that these issues are further compounded by the lack of adoption of standardised formats. However, due to the increase in scope of the DG JUST-commissioned report, several additional concerns have been highlighted around the ability of shareholders to exercise their rights in general meetings due to obstacles remaining in the local legislation of EU member states, which are especially prevalent in cross-border situations and affect the ability of shareholders to fully exercise their rights.
Legal uncertainty concerning shareholder rights
The report on the application of the SRDs identified eight problem drivers related to the provisions, implementation and application of SRD and SRD II, and to external market and technological trends. The drivers consist of:
- The significant room available for national discretion for the implementation of the SRDs
- Lack of clarity and inconsistencies in the SRD framework
- Fragmented and insufficient enforcement capacity
- Differences in national securities laws and fragmentation in post-trading infrastructure
- Increasingly complex and varied ownership structures and investment portfolios
- Reliance on intermediaries to exchange information between issuers and investors
- Obstacles to receiving timely transmission of information that shareholders need in order to make informed decisions at general meetings
- Difficulties to fully embrace technology for interactions in the chain of intermediaries
Legal uncertainty caused by the lack of uniform application and enforcement of the SRD and SRD II was identified in the report as the main problem and affects the other issues mentioned in this article. Because national regulators retained significant discretion on how the SRDs’ provisions were implemented, harmonisation across markets was undermined and the application of shareholder rights, especially in cross-border situations, remained complicated.
The report identified five potential areas that would benefit from intervention by the EU to ensure that the objectives and aims of the directives would be more fully realised. These areas are: (i) legal uncertainty concerning shareholder rights in the SRDs; (ii) the inability of shareholders to fully exercise their rights in general meetings; (iii) lack of a harmonised definition of a shareholder (shareholder identity); (iv) lack of timely communication and transmission of information from issuers to investors such that shareholder rights could be exercised; and (v) high cost and administrative barriers to the exercise of shareholder rights.
Exercise of shareholder rights in general meetings
The report validated the EBA and ESMA conclusion that lack of harmonisation across the EU created unnecessary barriers for shareholder participation. It echoed previous conclusions that the definition of shareholders and eligible securities should be harmonised, and that barriers to shareholder participation at meetings due to divergent market practices and documentation required should be removed. A good example is the recent regulatory change in Denmark that removed the requirement for power of attorneys which resulted in a significant improvement in shareholder participation at general meetings.
Another barrier that the report mentioned should be removed is the existence of divergent timeframes between markets around the convocation of meetings and (the existence of) record dates, i.e. the date when shareholders have to own shares in order to exercise their voting rights. Harmonising these dates would both further remove uncertainties on shareholders’ rights to participate in a meeting and make it easier for market participants to reconcile ownership rights ahead of a meeting.
The report mentioned that shareholders should be able to exercise their rights through participation in general meetings, both hybrid and in person. However, it suggests that virtual-only meetings should not be acceptable, with hybrid meetings being the industry norm. Proposed measures for exercising rights range from lowering or removing thresholds of share ownership to put items on meeting agendas to strengthening the rights of shareholders by providing them the opportunity to ask questions about items that are not on the agenda.
Shareholder identification
The aim of shareholder identification is to provide issuers with the ability to know who their shareholders are in order to establish direct contact with them. The obstacles that currently impede this aim are similar to those for shareholder participation, namely the lack of harmonisation of the definition of shareholder and eligible securities. The report mentions several approaches to harmonise these definitions all aimed to arrive at the same goal, namely that end beneficial owners of the shares are visible to the issuers. The report also advocates the reduction or complete removal of the 0.5 per cent ownership threshold for shareholder identification implemented in some European markets for shareholder identification, as it disenfranchises retail shareholders whose holdings are generally well below the threshold. To aid issuers being able to establish direct contact with their beneficial owners, issuers should get the ability to request more meaningful contact details, enabling them to establish a direct communication channel with their shareholders.
Interestingly, the report also mentions the possibility of establishing a centralised, EU-wide, register of shareholders, to alleviate the problem that information flows to establish shareholders’ identity are dispersed between a wide range of central securities depositories and transfer agents.
Transmission of information
The report noted that progress had been made on ensuring that information on corporate events reached investors in a timely manner in line with SRD performance standards.
It does, however, highlight issues with the quality of information sent in a machine-readable, standardised format. While often the key event details, the so-called ‘shell information’, are available, the full details of the agenda items are not sent in a standardised format in the original message and often contain a hyperlink to the relevant section of the issuer website.
The report suggests two options to ensure that adequate information is provided. Firstly, it recommends that issuers should adopt standards to make information that is currently optional to become mandatory, e.g. agenda information and create a Golden Operational Record (GOR) that can be transmitted via a machine readable standardised (ISO 20022) format. Another recommendation is the concept of a European Single Access Point (ESAP), targeted to go live in the summer of 2027, that could be used to host the information. While both would represent a credible way forward, the GOP has the advantage of leveraging an existing ecosystem while also enhancing efficiency and automation in the front to back investment lifecycle.
The report also raises the possibility of allowing shareholders the choice of submitting voting instructions through the custodial chain or directly to issuers through online platforms, similar to what currently is possible in Switzerland for certain issuers’ events. However, I would point out the advantage of the central securities depository (CSD) option as it leverages existing connectivity, provides global consistency and can be enriched via the adoption of standards by the issuers.
Costs
Another area impacted by the absence of harmonisation is costs and charges, and what can reasonably be included in charging for transmission of information needed to be SRD compliant. Intermediaries and member states have adopted diverging approaches, and the underlying rationale for the range being charged is not always clear. The report proposes that the EU establishes a standard set of permitted charges.
There also appears to be a divergence between charges for domestic and cross-border events. While in some cases sending instructions across borders can be more complex and therefore more costly, setting a standard on which costs can be charged could be beneficial.
The report concluded that, while charges are already being disclosed by intermediaries, there is nevertheless divergence on the format of the disclosures which can hinder transparency for end-users. It proposes that a common charging format should be introduced that can be modelled on the approach set out in the EU’s Payment Account Directive.
Lastly, the report suggests that capping of charges for the exercise of shareholder rights could be introduced to ensure that costs will be transparent and any uncertainties pertaining to charges would be removed, which in turn would encourage greater inclusion.
Next steps
The report does not appear to propose sweeping changes in a new EU directive or regulation but proposes a range of carefully targeted measures for the EU to address the root causes and remove the remaining issues around legal uncertainties for shareholders, and further increase adoption of the standards set out in the SRDs through effective working models at both EU and member state level to monitor and police adherence. The report also proposes adapting the current directives to clarify the definition of shareholders, the securities in scope, and harmonise key general meeting dates to remove barriers on shareholder participation that result from market or national practices e.g. proof of entitlement and the reconciliation obligation.
It also highlights that SRD and SRD II were both conceptually right but one of the biggest challenges has been the lack of policing by the local regulators, so this is seen as a future area of focus.
The recommendations are with the European Commission (EC), however there are currently no clear timelines for implementation, so we will have to wait and see how and when the potential changes are put into practice, but in line with the EC’s continued focus on promoting investment and share ownership in the EU we can all rest assured there will be another iteration of SRD in the not too distant future.
Broadridge is committed to supporting its clients as they navigate these changes. By delivering innovative solutions that address regulatory complexity and operational friction, we help firms realise the full potential of their shareholder engagement strategy — empowering investor voices today and into the future.
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