Minority shareholders to get FCA protection

The UK’s Financial Conduct Authority (FCA) is set to change its listing rules in a bid to provide extra protection for minority shareholders.

The new rules, which will come into play in mid-2014 and affect approximately 50 companies with a controlling shareholder, will ‘give shareholders in premium listed companies additional voting rights and greater influence over key decisions,’ says the FCA in a press statement.

Changes to the listing regime for premium firms – which must meet the ‘highest standards’ of transparency and corporate governance, according to the FCA – include:

• Ensuring listed companies are run independently of their controlling shareholders. This includes measures to empower independent shareholders with ‘a veto over transactions between listed companies and a controlling shareholder when this independence is threatened’ 
• Requiring separate approval of independent directors by independent shareholders, in addition to gaining approval from shareholders as a whole
• Stronger voting power for minority shareholders where ‘a company with a controlling shareholder seeks to cancel its listing’ or reduce minority shareholders’ rights
• Greater transparency for listed companies in a bid to ensure shareholders have the information they need to fully exercise their voting rights. 

The plans follow a consultation by the FCA’s predecessor, the Financial Services Authority, in October last year, in response to concerns from the investor community over how ‘premium companies’ are governed.

‘Active engagement by all shareholders is essential to make markets work well,’ says David Lawton, the FCA’s director of markets, in the press release. ‘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.’

The FCA says it balanced concerns raised by the investment community with feedback from the market to ‘strengthen the voice of minority shareholders, without turning minority protection into minority control’.