A leading investor body has called on the EU to introduce a mandatory sunset clause for dual class shares as European regulators sound out views on shareholder rights.

The International Corporate Governance Network (ICGN) has written to European Commission president Ursula von der Leyen asking for a sunset clause of seven years or less, setting a limit on the ability to transfer preferential shares and restrictions on which issues the voting power of dual class shares can be used.

The ICGN, a body representing fund managers with members that include names like Fidelity, Axa and Zurich, also calls for a mandatory shareholder vote on the “continuation of multiple voting rights” — a policy that would allow independent shareholders to exercise a vote over the conversion of dual class shares into ordinary shares.

The letter from ICGN says barriers to shareholder rights remain in the EU. “We encourage the European Commission to address these issues through greater harmonisation of corporate governance and shareholder rights rules at EU level — particularly through revision of the Shareholder Rights Directive II,” ICGN.

ICGN worries the EU is pushing shareholders to play a greater role in sustainability stewardship while at the same time legislation is undermining shareholder rights.

Séverine Neervoort, global policy director at ICGN, says: “We want to ensure the message is heard that shareholder rights are essential to protecting beneficiaries—including savers and pensioners.”

ICGN also proposes that rules and regulations relating financial and sustainability reporting, corporate governance, shareholder rights and the functioning of markets should all come under the same EU directorate general.

AGM practices are also a target for ICGN. The body calls for the harmonisation of AGM rules, specifically the use of hybrid (in person plus online) AGMs instead of the road taken by some countries to continue with Covid measures of virtual-only or “closed-door” annual meetings. “This significantly limits the ability of shareholders, especially minority shareholders, to interact with boards and management, ask unmoderated questions and make statements from the floor.”

ICGN has a track record of campaigning for shareholder rights and caused a stir in London earlier this year after heavily criticising listing reforms that removed shareholder votes on significant transactions and relaxed of dual class share rules.

The reforms were given the go ahead in July with the support of new chancellor Rachel Reeves.