Voting Rights on Equity used as Financial Collateral

摘要

The right to vote in a company's general meeting is one of the key statutory rights for shareholders. Regularly it is an irrefutable presumption that a shareholder is only the person who is registered as a shareholder. In the case of equity used as financial collateral, it can be questionable who is entitled to voting rights attached to the financial collateral. Securities lending and repos are the two main types of securities financing transactions in the European market. In both, the collateral provider transfers the legal ownership of equities to the collateral taker. If a collateral provider wishes to exercise the voting rights attached to the transferred equities, he needs to recall the collateral. The main master agreements widely used in the European repo and securities lending market employ different solutions regarding the right of a collateral provider to substitute the financial collateral. These distinctions are explored in the paper, along with the analysis of the relevant provisions of the Financial Collateral Directive.