British regulators Tuesday unveiled a package of rule reforms that aim to protect minority shareholder rights in companies that have a controlling shareholder.
The Financial Conduct Authority (FCA) has proposed new rules that will give minority shareholders in premium listed companies additional voting rights and greater influence over key decisions. The proposals come following a consultation that it initiated last year to respond to concerns from the investment community over the governance of companies with a controlling shareholder and the rights of minority shareholders.
Among the changes, the proposals would: give independent shareholders a veto over transactions between listed companies and a controlling shareholder when this independence is threatened; require separate approval of independent directors by independent shareholders, in addition to gaining approval from shareholders as a whole; and, enhancing the voting power of minority shareholders when a controlling shareholder seeks to cancel a firm’s listing, or remove minority shareholder rights.
The FCA also proposed enhanced transparency requirements for listed companies to ensure shareholders have the information they need to exercise their voting rights. The FCA is also consulting on additional enhancements to the listing rules in a new consultation paper. It intends to implement the full package of measures in mid-2014.
“Active engagement by all shareholders is essential to make markets work well. By safeguarding minority interests from abuse by controlling shareholders, these changes will promote market integrity and empower minority shareholders to hold the companies they invest in to account,” said David Lawton, the FCA’s director of markets.