Proposals follow controversy over shareholder control at Bumi and Eurasian Natural Resources
UK regulator the Financial Services Authority (FSA) has proposed changes to rules governing the listing of companies in the UK in a move to head off further disputes over irregularities such as those at the Indonesian business of London-listed coal mining group Bumi and other companies seen as unduly controlled by particular shareholders.
Following consultation with the Financial Reporting Council, the FSA says it proposes to detail the circumstances required for allowing a free float of below 25 percent for premium listings, and to highlight the opinion that any free float below 20 percent would be ‘unlikely’.
The proposals would also remove ‘the requirement for a minimum absolute percentage free float within the standard segment, provided that sufficient liquidity is present,’ the FSA says.
Under the heading of corporate governance, the FSA proposes to adopt ‘greater corporate governance requirements for companies with a dominant shareholder’ and ‘increase the tools available to independent shareholders to influence the governance of the companies in which they have invested.’
The FSA’s corporate governance proposals would outline the concept of a ‘controlling shareholder’, and require agreements between that shareholder and minority investors to govern their relationship and ‘ensure this agreement is complied with on an ongoing basis. This will ensure the company is managed independently of that [controlling] shareholder.’
‘We believe these proposals will strengthen the investor protections afforded by the listing regime, particularly for companies with controlling shareholders,’ says David Lawton, the FSA’s director of markets.
‘Of course, it is primarily the responsibility of shareholders to use these new provisions effectively.’
The proposals come after a series of corporate governance issues came to light last month concerning Bumi, which has started investigating information provided by a whistleblower into operations at its coal mining business in Indonesia.
The proposals could make it more difficult to become listed in the UK via the shortcut of merging with a group that is already listed, as was the case with Bumi and Eurasian Natural Resources, the Kazakhstan-based mining company that caused a stir last year for its use[no idea what he means here] by three prominent shareholders with a 45 percent stake.
The FSA has requested online feedback from UK and overseas issuers, investors, consumers and advisers of UK-listed securities to the proposed amendments on its website: www.fsa.gov.uk/library/policy/cp/2012/12-25.shtml.
