ARUG II – Implementing Law regarding Shareholders’ Rights Directive II

The Implementing Law regarding Shareholders’ Rights Directive II (ARUG ll) stipulates the application of the European requirements of said EU Directive in German law.

For this purpose, comprehensive changes have been made to the German Stock Corporations Act (“AktG”) and various further laws and ordinances.

What are the rights and duties granted pursuant to ARUG II?

The Implementing Law of Directive 2017/828 amending Directive 2007/36/EC regarding the encouragement of long-term shareholder engagement (ARUG ll) obligates issuers to a substantial extent to involve the shareholders within the Member States of the European Economic Area (EEA) in the corporations’ business policy processes.

The requirement for this is positive knowledge of the identity of the shareholders concerned (Know Your Shareholder – KYS).

Without a successful identification of its shareholders, an issuer will not be able to adequately fulfil its legal obligations pursuant to ARUG II in the future.

Pursuant to ARUG II, issuers have been authorised since 3 September 2020 to request information from intermediaries within the EEA.

This statutory provision enables the identification of all shareholders, who are domiciled in the EEA or who maintain their securities account at an intermediary within the EEA.

In addition to publishing the convening notice for the general shareholders’ meeting in the Federal Gazette as the publication medium for company announcements pursuant to Sec. 121 (4) AktG, it has been a further requirement since 3 September 2020 to mail out a convening notice for the general shareholders’ meeting pursuant to Sec. 125 AktG along the entire chain of intermediaries.

What are the subject matters that are treated by the ARUG II?

Contents relating to transactions with related parties (Related Party Transactions), the identification and information of shareholders (Know Your Shareholder), and transparency obligations of institutional investors, asset managers and voting rights advisers have been adopted largely unmodified from the government’s draft bill. Changes have been made to the contents relating to the remuneration of the management board and supervisory board (“Say on Pay”).

The complete text of the law can be found here.

What are the deadlines according to ARUG II for identifying shareholders?

The requirements for the identification of shareholders (Know Your Shareholder) have been in effect since 3 September 2020.

The rules on informing shareholders apply to general shareholders’ meetings.

When did ARUG II come into force?

Implementation of the requirements in national law was scheduled by 10 June 2019 under the Shareholders’ Rights Directive II.

ARUG II was announced on 19 December 2019 in the Federal Law Gazette and it has been in effect since 1 January 2020.