General Meetings: law firms fear increase in underwriting costs for listed companies

The Law Society has criticised a European Commission proposal to increase the notice period given to shareholders for general meetings, claiming it 'fails to take account of business reality'.


Draft regulations - proposed by Internal Market and Services Commissioner Charlie McCreevy and intended to facilitate the cross-border exercise of shareholders' rights in listed companies - increase the notice period for annual general meetings (AGMs) and extraordinary general meetings (EGMs) from 21 and 14 days respectively to 30 days in both instances.


Peter Graham, a consultant at City firm Berwin Leighton Paisner and chairman of the Law Society's company law committee, said: 'We are concerned about the impact this could have on UK listed companies.'


The proposal draws no distinction between AGMs and EGMs, he said, and to require a 30-day notice period for EGMs would have potential cost implications for companies.


Mr Graham questioned whether this was compatible with the commission's policy to opt for instruments that put the least burden on companies and leave them with as much flexibility as possible.


Slaughter and May associate Helen Shilling, who leads the committee's corporate governance working party, told the Gazette: 'Concern arises in relation to the increase in notice period for EGMs because they are normally held for one-off purposes, usually to deal with an acquisition or financial proposal. These are events which are often time and price sensitive.


'The main concern is an increase in underwriting costs where these are applicable and also the greater opportunity for the creation of false markets.'


Ms Shilling added: 'The UK share market is very liquid and transparent, so we may not have the timing difficulties that some other European countries have.'


Kevin Martin, Law Society President, said Chancery Lane supported the overall objectives of the commission but warned that the current proposal 'fails to take account of business reality'. He said: 'Of course we want to facilitate cross-border voting and participation in general meetings, but I have yet to be convinced that the current proposal is appropriate for EGMs.'


Mr Martin added that the Society would work to convince members of the European Parliament and member states that a more balanced solution could be found.