Regulators yesterday announced safeguards to listing rules on the London Stock Exchange to protect minority shareholders and repair the damage done to the reputation of the City after a number of controversial flotations.
After a two-year study and consultations with ministers, shareholders and company executives, the UK Listing Authority, the market gatekeeper, unveiled a three-point plan to tighten rules.
It comes after the London listings of two scandal-tainted emerging-market mining companies – Eurasian Natural Resources Corp (ENRC) and Bumi – caused an investor backlash and led to warnings that they had besmirched the City's standing.
Both ENRC and Bumi were controlled by foreign tycoons and lured to London by persuasive bankers, liquid markets and a flexible listings regime, but have since been embroiled in rows over corporate governance standards.
David Lawton, director of markets at the Financial Conduct Authority, which oversees the UK Listing Authority, said: "These are important proposals that protect minority shareholders and will strengthen the reputation of London as a place to list."
First, the regulator will require all majority shareholders of premium-listed corporates, including the biggest groups on the FTSE 100 and FTSE 250, to keep an “arm’s length” distance from the company and not interfere with day-to-day control.
Second, if majority shareholders, with holdings of 30 per cent or more, breach these rules, other investors in the company will then be allowed to vote on all transactions involving the company.
Third, for companies with majority shareholders, there will also be a double vote for independent directors. This means they must pass a vote of all shareholders and a separate vote of minority shareholders to achieve election.
The authority rejected calls to increase the minimum free-float above the floor of 25 per cent because this was considered a “blunt tool”. – (Copyright The Financial Times Limited 2013)
