Half the companies in the FTSE 100 could be affected by new rules designed to protect minority investors.
The Financial Conduct Authority (FCA) has outlined rules which would give shareholders in large UK-listed companies additional voting rights and influence in key decisions.
It will also mean a company cannot appoint independent directors without approval from minority investors, and will enhance voting powers for them when a company tries to cancel its stock market listing.
All companies with a market capitalisation of over £700m and a controlling shareholder of 30% or more will be affected. This is estimated to include approximately half of the FTSE 100 index, including Sports Direct and Associated British Foods.
The rules are designed to stop controlling investors overruling smaller shareholders as has happened at companies such as Bumi and Eurasian Natural Resources Company (ENRC). In these cases, large foreign investors were thought to be acting against the interest of smaller investors and their actions had a negative impact on the share price.
David Lawton, the FCA’s director of markets, said: "Active engagement by all shareholders is essential to make markets work well. 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."
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Short-term noise or something sinister?