Christoph Van der Elst is Professor of Business Law and Economics at Tilburg Law School and Ghent University; and Anne Lafarre is Assistant Professor at Tilburg Law School. This post is based on their recent paper.
Current shareholder engagement systems face large classical inefficiencies. The involvement of intermediaries in the exercise of fundamental shareholder rights such as voting, resulting in mistakes and costly court cases, shows the “absurdness” of the current systems. In our latest paper, we provide new arguments that blockchain technology has the clear potential to solve many of the current problems.
Let’s start with an example. When DNick Plc’s annual general meeting (“AGM”) approved the resolutions to cancel its listing, a group of minority shareholders started an appraisal procedure. The shareholder register only included two shareholders: the CEO of DNick and the Bank of New York Depository (Nominees) Ltd (“BNY”). BNY, the common depository agent, held the shares on trust for the account holders with Clearstream, which is the central securities depository (“CSD”) subsidiary of Deutsche Börse, where DNick was listed. Clearstream Interests (“CIs”), held by banks and financial institutions, were traded on the Deutsche Börse. Hence, when the minority shareholders of DNick started the appraisal procedure, it were only customers of the banks that held the CIs, and, in accordance with section 112(2) of the UK CA 2006, stating that “[e]very other person … whose name is entered in its register of members, is a member of the company”, they were not members of DNick. Moreover, DNick’s articles of association stated that only the holders of an account with Clearstream were allowed to vote in general meetings or appoint a proxy. As the banks and other financial institutions that held the CIs voted in favor of the delisting, the application to the court for the cancellation of the resolutions pursuant to section 98 CA 2006 was not open. The minority shareholders of DNick Holding saw their appraisal case dismissed.
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