Enhancements in UK Listing Rules and Shareholder Voting: What You Need to Know
In recent months, the Financial Conduct Authority (FCA) has introduced significant changes to the UK listing regime, aiming to modernise and streamline the process for listed companies and their shareholders. These reforms are set to come into effect in 2024 and will have a profound impact on how companies are listed, managed, and how shareholders participate in key corporate decisions.
New UK Listing Rules
The FCA has replaced the existing Listing Rules with a new “UK Listing Rules” section of the FCA Handbook. This overhaul includes several key changes:
Dual-Class Share Structures
One of the most notable changes is the expanded permission for dual-class share structures. Under the new rules, companies can implement these structures before applying for a listing, allowing directors, employees, and certain investors to hold shares with enhanced voting rights. These enhanced voting rights can be exercised on all matters except specific actions such as cancelling a listing, transferring between listing segments, approving certain employee share schemes, issuing new shares at a significant discount, and buying back a substantial portion of shares.
Controlling Shareholders
The requirement for companies to be independent from controlling shareholders (those holding 30% or more of the voting rights) has been retained, but the need for a legally binding agreement with such shareholders has been removed. This change is intended to reduce administrative burdens while maintaining corporate governance standards.
Shareholder Votes
The FCA has modified the rules regarding compulsory shareholder votes. While votes are still required for critical corporate actions like reverse takeovers, cancellation of listing, and significant share buy-backs, compulsory votes for large transactions and related party transactions have been eliminated. This move is designed to enhance the efficiency of corporate decision-making processes.
Electronic Voting for Retail Shareholders
In line with these regulatory changes, investment platforms such as AJ Bell have been enhancing their services to make shareholder participation more accessible. AJ Bell, for instance, has introduced electronic voting capabilities for its retail investors. This new service allows shareholders to cast votes electronically for company shareholder meetings, both for UK-based and international shares and investment trusts. This development is part of a broader trend to increase retail investor engagement and make voting more convenient.
Importance of Shareholder Engagement
The ability for retail shareholders to participate in corporate decisions electronically underscores the growing importance of shareholder engagement. As retail investors become more active in the market, platforms like Hargreaves Lansdown, Interactive Investor, and AJ Bell are playing a crucial role in facilitating this engagement. These platforms provide step-by-step guides on how to vote, ensuring that shareholders can exercise their rights efficiently.
Practical Steps for Shareholders
For shareholders using these platforms, here are some practical steps to ensure your voice is heard:
AJ Bell
Log into your AJ Bell account via desktop, select “Voting Instructions” from your account menu, and follow the prompts to submit your voting instructions.
Hargreaves Lansdown
Log into your account via desktop, select “View shareholder meetings” or “messages,” and provide your voting instructions.
Interactive Investor
Access the “Voting Mailbox” under the “Portfolio” tab in your online account to cast your votes.
Conclusion
The FCA’s reforms to the UK listing regime and the initiatives by investment platforms to enhance shareholder voting capabilities mark a significant step forward in corporate governance and shareholder engagement. These changes aim to balance the need for efficient corporate decision-making with the protection of shareholder rights.
As a shareholder, it is crucial to stay informed and actively participate in the voting process to ensure your interests are represented.
At Cutts & Co Accountancy, we are committed to keeping our clients updated on the latest regulatory changes and market developments. If you have any questions or need further guidance on how these changes might affect your investments, please do not hesitate to contact us.
