CITY WATCHDOG the Financial Conduct Authority is to strengthen the rights of minority investors in premium listed companies by tightening company buy-out rules that will curb the power of controlling shareholders.
Under the proposals, the FCA is to tighten rules around de-listing a company from the stock exchange so that controlling shareholders must gain the approval of a majority of independent investors in order to take a company private.
The move follows a series of controversial take-over battles in which smaller investors’ rights were seemingly ignored by dominant shareholders.
The rule change will see controlling shareholder forced to obtain support from at least 75% of a company’s shareholders and gain approval by a majority of independent shareholders, rather than the previous requirement which left smaller investors powerless against the individual investors who own more than three quarters of a company’s shares.
In takeover offer situations, an equivalent requirement based on acceptances will apply, except that when an offeror has acquired or agreed to acquire more than 80% of voting rights no further approval/acceptances by independent shareholders would be required to cancel the premium listing.
If approved by the FCA board, the rule will come into force from 14 May.