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Project Scope

Following the 2021 AGM season, shareholders became concerned that the efficacy of the voting process had been negatively impacted by changes in the Irish market. This is a particular issue at a time when scrutiny of voting records from both clients and wider society is high.

Nine investors came together to form an Investor Forum-convened Working Group, to share data and experience, collectively investigate the issue and make the case for change. The Group sought to identify the key contributory factors through meetings with participants representing every part of the voting chain. The objective of the project was to remove the barriers to investors being able to exercise effective stewardship.

Context

As a result of the United Kingdom’s decision to leave the European Union, the CREST system was no longer authorised to act as a central securities depository (“CSD”) for Irish uncertificated securities with effect from 12th March 2021.  Euroclear Bank was selected to provide a replacement holding and settlement system for securities of Irish companies listed or quoted on Euronext Dublin and/or the London Stock Exchange. The Euroclear Bank model is an ‘intermediated’ or ‘indirect’ system, which is structurally different to CREST. Relevant securities are held by Euroclear’s nominee, who are the shareholder on the register.

Subsequent to the migration to Euroclear Bank, investors observed:

  • an increased level of disintermediation in the voting chain;
  • shorter time frames for decision-making;
  • an increase in shareblocking; and
  • significantly lower levels of voter turnout at the 2021 AGMs of Irish companies.

Investors were concerned that the unintended consequence of the change of CSD was an erosion of their rights as beneficial holders in the equity of Irish listed entities. The benefits that the Shareholder Rights Directives intended to convey to institutional investors – including timely conveyance of information, confirmation of vote, increased transparency, and a prohibition of share blocking – have been negatively impacted by the systems changes.

Project notes

The Forum wrote a project note for investors sharing the Working Group’s findings.  The Forum also engaged with the Irish Markets Committee of Euroclear Bank to ensure that the Committee fully understood the perspective of institutional investors in Irish equity markets and to encourage engagement and change in advance of the 2022 voting season.an update in December.  Both notes can be accessed via the links (above right).

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