On 25th August in the FTMoney supplement, FT writer Aime Williams explained how small investors could influence companies. But unfortunately some points may have misled readers. I have sent Aime the following communication:
I read your article entitled “Small investors stand up and be counted” in this weekend’s FT with interest. It is good that the article shows how private investors can have an impact on companies, and it will no doubt encourage people to attend AGMs.
But the comments from Richard Stone of the Share Centre are to say the least, somewhat inaccurate. The 2006 Companies Act did help to enfranchise those in nominee accounts in relation to giving them the ability to vote, but to say that ‘investors in nominee accounts have had the same rights as direct shareholders since the 2006 Companies Act’ is simply wrong. For example, Members of the company (i.e. those on the share register) have the ability to challenge a poll, or apply to a court to object to a change from a public to a private company. Those rights are lost if you are only a beneficial owner in a nominee account. That has been confirmed in past legal cases.
There is also the problem that there is no legal obligation for brokers to enfranchise investors except in the case of ISA accounts, and most stockbrokers do not even inform their clients of that fact or make it practically easy for them to vote. The Share Centre does but many do not. In addition there are difficulties with AIM companies.
In reality the widespread adoption of nominee accounts rather than investors being on the share register of a company has fatally undermined shareholder democracy and the vast majority of retail investors now do not vote.
The documents on this web page, which I wrote, spell out the facts about the nominee system and shareholder rights: https://www.sharesoc.org/campaigns/shareholder-rights-campaign/
It is still true that we need a complete reform of the existing system so that shareholders in companies, however they hold their shares, are given the ability to vote and to attend General Meetings, without artificial barriers. We also need regulations to ensure that they can vote easily and that Companies and Brokers inform everyone entitled to vote or attend meetings when the time arises to do so. Only then will shareholder democracy be restored.
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
I note that Richard Stone also says: “To operate a low-cost trading platform like we do can only work if we pool all the shareholdings into one nominee account,” This is nonsense. The existing CREST electronic registration system can be used efficiently, without brokers usurping shareholders’ rights.
For what it’s worth, H-L have always been responsive when I’ve asked them to vote my shares held c/o them. Including the Foresight 4 VCT vote where shareholder action scored a 50/50 split on re-electing directors! Can’t speak for other platforms.
Holding shares directly means having to deal with the registrars, which can be a lot more hassle than dealing with a platform. Particularly Capita, who even today refuse to bring their information systems up to date with what I’d’ve expected into the 1980s (when I graduated into a career primarily in software) and provide a portal to manage all one’s holdings.
Re the last comment, with over 60 shares held directly, I hardly ever need to speak to registrars and there is hence no problem with the quality of the systems of different registrars.
Since your latest article on Foresight VCT 4 doesn’t permit comments, I’m following up here instead.
This AGM overlaps with the tender offer: having tendered all my shares, I don’t know how many I’ll still own at the time of the AGM.
I submitted my voting instructions to H-L with a request to vote whatever shares I still hold. They replied that because final settlement doesn’t happen until the 29th, they can’t vote my shares this time.
I don’t understand that reasoning, but I can’t help thinking that the timing of the tender offer relative to the AGM might affect other shareholders ability and motivation to vote, and perhaps materially affect the outcome.