British regulators are proposing added corporate governance requirements for companies with a dominant shareholder, in an effort to ensure that these sorts of publicly traded firms are still independently managed.
The UK Financial Services Authority proposed a number of changes to its listing rules Tuesday that aim to bolster investor protection. One of the central changes is the introduction of greater corporate governance requirements for companies with a dominant shareholder.
The FSA is proposing measures that it hopes will increase the tools available to independent shareholders to influence the governance of these sorts of companies. It is seeking to introduce the concept of a ‘controlling shareholder’; and, require an agreement to regulate the relationship between that sort of shareholder and the company, which must be complied with on an ongoing basis.
“This will ensure that the company is managed independently from that shareholder,” the FSA says.
It will also require a majority of independent directors serve on boards where a controlling shareholder exists; and, it will introduce a new dual voting procedure to allow independent shareholders to have more say in their appointment.
And, it is proposing some changes to its rules around free float requirements; along with changes to the rules for reverse takeovers, financial information requirements and transactions; among other things.
“We believe that these proposals will strengthen the investor protections afforded by the listing regime, particularly for companies with controlling shareholders,” said David Lawton, the FSA’s director of markets. “Of course, it is primarily the responsibility of shareholders to use these new provisions effectively.”
The proposed changes follow a consultation initiated in January, amid market debate on the issues of free float, minority shareholder protection, corporate governance and the initial public offering market in general.