Shareholder Engagement and Voting Rights Policy
The “Shareholders’ Rights” Directive transposed into French law aims to strengthen long-term investment in companies and promote the transparency of investments made by “institutional investors”. ARCHIMED SAS is required to describe and make available to the public their long-term commitment to the equity issuers in which it invests its funds.
1. Scope of application:
The shareholder engagement policy describes the way in which the company integrates its role as shareholder into its investment strategy. It therefore targets investments made in shares.
The shareholder engagement policy applies to asset management companies that manage UCITS, AIFs subject to full application of the AIFM directive (Article L 533-22 §I of the French Monetary and Financial Code) and mandates.
The following are not, therefore, subject to the policy: asset management companies that only manage
AIFs below the thresholds of the directive,
the securitisation undertakings referred to in part I of Article L 214-167 and
“other collective investments”.
AFG note: The inclusion of mandates can be inferred from the directive without appearing explicitly in Article L 533-22 of the French Monetary and Financial Code. However, France specifically targets investment firms providing portfolio management services (see below), thus covering discretionary management.
Whereas the engagement policy concerns investments in shares made by UCITS and AIFs subject to the AIFM directive, the voting policy concerns only investments in shares made by:
Private equity funds for the general public (FCPR, FIP, FCPI)
FFAs (funds of hedge funds)
FPSs (specialised professional funds) and FPCIs (professional private equity funds)
FPVGs (professional general purpose funds)
Employee savings funds
2. Policy objectives
The shareholder engagement policy describes how the following are ensured, in particular:
Monitoring of strategy, financial and non-financial performance, risks, capital structure, social and environmental impact and corporate governance;
Dialogue with companies held;
Exercise of voting rights and other rights attached to shares;
Cooperation with other shareholders;
Communication with relevant stakeholders;
Prevention and management of actual or potential conflicts of interest in relation to their involvement
One or more of these items may be omitted from the shareholder engagement policy if the reasons for their omission are included.
3. Policy privisions
3.1 Monitoring of issuers
Monitoring of strategy, financial performance, risk, capital structure and corporate governance are inherent in the selection of issuers at ARCHIMED SAS.
Prior to each investment decision, ARCHIMED SAS performs comprehensive due diligence involving three or four members of the investment team.
Due diligence is organised in such a way as to validate the investment thesis and obtain a thorough understanding of the business model; the Investment Committee determines the budget allocated to due diligence.
The due diligence procedures include systematic financial, legal, tax and ESG reviews. They may also, where the activity warrants, include an audit of the commercial, HR, information systems, environmental, industrial processes, intellectual property, insurance and other aspects of the business.
The investment team conducts an ESG risk and opportunity assessment using a questionnaire. This questionnaire lists, for each sector, the risk factors categorised according to their severity (low risk, medium risk, high risk). If necessary, an in-depth analysis is carried out by an external service provider.
The action plan is developed in collaboration with the management team based on the results of the due diligence procedure.
The negotiation of the main terms of the legal documentation (deed or protocol of sale/capital increase, commitments, guarantee on reported assets and liabilities, shareholder agreement, articles of association and management package) is conducted by a partner with the assistance of a lawyer.
Debt financing providers must have given a financing commitment (quantum and terms) for the transaction.
During the investment phase, the following actions are implemented:
The portfolio is reviewed each month by the Investment Committee and the ARCHIMED partners during the Monthly ARCHIMED Meeting (MAM) on the basis of the monthly reports provided by each of the companies in the portfolio.
These monthly reviews consist of a presentation and discussion that covers, among other things, the following:
Financial and operational performance (“Key Performance Indicators”)
ESG (Environmental, Social/Societal, Governance)
180-day plan progress (for recent investments)
Market and competitive developments
Management and governance: management team, organisation, functioning of the Board, relations between ARCHIMED and the company
Summary of market, operational, financial and transactional risks (and opportunities)
Prospects for reinvestment, partial or total realisation
Review of the initial value creation plan and any need to adapt it
Depending on performance, outlook, market developments and mergers and acquisitions in the sector, various actions are decided upon, such as:
the increased involvement of a team member on a development topic,
preparation for reinvestment, or,
detailed performance gap analysis.
The human resources put in place to monitor the investment are as follows:
The management team consists of seven financial managers, as this job title is defined by the AMF, an investment team, as well as operational partners.
ARCHIMED SAS is committed to fully exercising its responsibility as a shareholder in the interest of the holder, by investing with a long-term outlook and analysing unlisted companies in detail, with the aim of creating value. To this end, the managers analyse the economic and financial performance of the companies in which they invest, and pay particular attention to their good governance, as well as their social and environmental footprint.
The ARCHIMED SAS investment team meets frequently with the management of the companies in which it has invested. These meetings aim to better understand and update the companies’ strategy, opportunities and risks.
An ESG integration policy has been put in place, ensuring that companies are assessed by the manager each year, based on the information provided by the company in its CSR policy. This ambitious approach ensures that non-financial factors are taken into account alongside financial factors when making investment decisions.
3.2. Dialogue with companies held
As a management company investing mainly in unlisted companies, ARCHIMED SAS aims to add value by helping its portfolio companies to benefit from the opportunities available to them, while assisting them in anticipating and preparing for risks. Prior to any investment, ARCHIMED SAS performs various kinds of due diligence (commercial, external growth, tax, financial, social and strategic). The analysis conducted prior to each investment is presented to the Investment Committee and the potential investments are voted on by the committee members.
Post-investment monitoring of these elements continues: managers meet regularly with the directors and key executives of the portfolio companies. Dialogue is structured through governance bodies (board of directors or supervisory board), working meetings or ad hoc requests. During this phase, the business plans defined before the investment are compared with the actual figures, any deviation is analysed and, where necessary, an action plan is drawn up.
The cornerstone of our management company’s approach is therefore the dialogue that ARCHIMED SAS establishes upstream of any investment with the managers of the companies in which we invest on behalf of our clients.
3.3. Exercise of voting rights and other rights attached to shares
General principles applicable to the analysis of resolutions
The Management Company’s principles are:
1) to act in the exclusive interest of the unitholders, in accordance with the Funds’ regulations and applicable conflict of interest rules,
2) to ensure there is transparency in the information given to shareholders,
3) to ensure that the powers of the General Meeting are maintained.
In accordance with these principles, ARCHIMED SAS examines the resolutions put to vote on a case-by-case basis and in particular:
1) Decisions leading to a modification of the articles of association (Extraordinary General Meetings),
2) Equity issuance and repurchase programmes,
3) Approval of the financial statements and allocation of earnings,
4) Appointment and dismissal of corporate bodies,
5) Regulated agreements,
6) Appointment of statutory auditors.
The implementation of ARCHIMED SAS's voting rights procedure is based on the monitoring and analysis of the resolutions proposed at General Shareholders' Meetings, in application of the basic principles of good governance set out below:
monitoring compliance with the statutory rights of shareholders (application of the “one share, one vote” principle),
monitoring the quality and powers of members of the board of directors or supervisory board (application of the principles of separation of powers and independence of the board),
monitoring the remuneration paid to senior managers and, in general, verifying the suitability and proportionality of the profit-sharing of senior managers and employees (application of the principles of transparency and fairness of remuneration),
monitoring the allocation of earnings and use of capital, (the principle of “prudent management” of the capital from which cash remuneration is paid to senior managers),
approval of the accounts, management report, regulated agreements and the reappointment of the Statutory Auditors (application of the principles of accounts integrity, quality of communication and limiting conflicts of interest when renewing statutory auditor mandates),
analysis of strategic developments and capital transactions (which must be justified, balanced and uphold the preferential subscription right of shareholders) such as share schemes to repurchase shares or issue new shares, and all the various proposals that may be submitted to shareholders (directors’ fees, other statutory changes, etc.).
Structure in place for the exercise of voting rights
The persons entitled to vote are the Chairman, Managing Directors and all employees or Operating Partners who have been given the power to represent the company. They are in charge of examining and analysing the resolutions presented by the senior managers of the companies in which the Management Company’s funds are invested. The investment teams are responsible for organising and reporting on the exercise of voting rights.
Conditions for exercising voting rights
Nationality of the companies:
The voting right will be exercised for all the issuing companies. Regardless of the location of the head office. If, however, the expenses involved are deemed too great, the right to vote will be exercised by means of a proxy.
The voting right will be exercised if the managed AIFs hold globally at least 5% of the market capitalisation of the issuer.
Depending on the circumstances, the management team may decide to exercise its voting rights for companies that do not meet the two criteria (nationality and ownership threshold) if it deems it appropriate. The resolutions are analysed by the manager in charge of monitoring the company in question and by the Compliance and Internal Control Officer. They ensure that aspects unfavourable to the interests of the company or minority shareholders are identified.
The principles set out below concern all the securities on which ARCHIMED SAS is required to vote. These principles may be irrelevant, depending on the nationality of the companies, as national laws attribute different prerogatives to shareholders’ meetings.
3.4. Cooperation with other shareholders
ARCHIMED SAS invests mainly in unlisted companies. The dialogue with the company and the shareholders among themselves is governed by the articles of association. Usually, because the number of shareholders is limited in unlisted companies, the articles of association are completed by a shareholders’ agreement. These agreements are complementary to the articles of association and make it possible to define, among other things, the methods for resolving conflicts, protecting minority shareholders, and preventing the sale of shares from leading to a loss of control or liquidation of the company.
Ultimately, shareholders’ agreements cover three types of purposes relating to share capital (e.g. locking in the composition of share capital), voting rights (e.g. prior consultation before each general meeting) and the conditions for organisation and operation of the company (e.g. availability of information at a more regular frequency than required by the regulations).
3.5. Communication with relevant stakeholders
ARCHIMED SAS interacts with various stakeholders: shareholders (co-investors), managers and key executives, bankers, advisors, consultants, etc. Co-investors, managers and key executives represent the first circle of relevant stakeholders in our business, with value being added by both managers and individual financial investors. These exchanges may be part of a broader initiative to address systemic issues, such as climate change, or more company-specific concerns shared collectively by a group of investors.
3.6. Prevention and management of conflicts of interest
In accordance with the Policy on the Prevention of Conflicts of Interest established by the Management Company, the representatives of ArchiMed SAS must, with regard to the exercise of votes:
act faithfully and fairly in the best interests of the holders and the integrity of the market,
conduct their business with the skill, care and diligence required for the best interests of the holders and market integrity, transparency and market security,
comply with all regulations applicable to the exercise of its activities so as to promote the best interests of holders and market integrity,
ensure, as part of their duties, that the information disclosed to them is used for the sole benefit of the clients.
Members of the investment team must alert the Compliance and Internal Control Officer without delay of any conflict of interest situation likely to affect the free exercise of voting rights. The Management Company will then assess the usefulness of voting after having first obtained the opinion of the Compliance and Internal Control Officer.
4. Reports on the exercice of voting rights and the shareholder engagement policy
In accordance with its obligations, ARCHIMED SAS reports on the manner in which it has exercised its voting rights and its shareholder engagement policy in a report attached to the annual management report.
ARCHIMED SAS therefore prepares an annual report in which it reports on the application of its voting policy and its shareholder engagement policy. The first publication must be effective no later than three months after the publication of Decree No. 2019-1235 of 27 November 2019.
This report is drawn up by one of the members of the investment team and is sent to the holders within six months of the end of the Management Company’s financial year (at the same time as the annual report). This communication is not compulsory when this information is already available on the Management Company’s website.
The report includes, in particular:
A general description of how voting rights were exercised;
the number of companies in which ARCHIMED SAS exercised voting rights compared to the total number of companies in which it held voting rights,
cases in which it considered itself unable to comply with the principles set out in this policy and any conflicts of interest encountered during the votes,
the voting methods used and whether the vote was for, against or an abstention for each resolution,
and, if applicable, decisions taken with regard to resolutions of related companies of which a mutual fund is a shareholder and resolutions proposed by minority shareholders without the approval of the Board,
An explanation of the choices made on the most important votes,
Information on the possible use of voting consultants,
The direction of votes cast during general meetings, which may exclude votes that are insignificant due to their subject matter or the size of the holding in the company.
In addition, and in accordance with the provisions of the France Invest code of ethics, ARCHIMED SAS reports, in the annual report of the funds it manages, on its practices in terms of voting rights whether or not the securities are admitted to trading on a Market. For securities admitted to trading on a Market, this report may refer to the management report of the Management Company or reproduce the management report.
5. Policy circulation and review
ARCHIMED SAS makes this policy and the annual reports on its application available to its clients and AIF unit holders on request.
The existence of this policy is also mentioned on the ARCHIMED SAS website: https://www.archimed.group/;
ARCHIMED SAS does not anticipate an annual review of this policy; it will be updated as required.