The City watchdog has laid out a new set of rules that will give minority shareholders more protection and say in important corporate decisions.
The Financial Conduct Authority’s (FCA) updated listing rules are aimed at smaller investors in premium-listed companies, London’s blue chips, and are designed to end a run of damaging governance rows.
Minority owners will have the power to overrule plans put forward by majority stakeholders – those with stakes of 30% or more – who are being told to become more arms’ length from their investments.
These new powers will include the appointment of independent directors and blocks on moves by controlling owners to take a company private.
The FCA said it was giving minority shareholders a voice “without turning minority protection into minority control”, calling for more transparency to ensure shareholders are up to date with events.
The measures are expected to be enforced in mid-2014.
London has been hit recently by controversies about the standards of London-listed companies run by foreign investors, including ENRC and Bumi, majority-owned by Kazakh and Indonesian investors respectively.
The FCA’s director of markets, David Lawton, 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.”
ENRC’s value has diminished as it prepares to leave the stock market after being bought out by its three founders and the Kazakh government, which together owned around 55% of the company.
It was the subject of a Serious Fraud Office investigation into allegations of bribery and corruption.
Bumi has seen its share price dwindle in a similar manner. The company, which owns Indonesian coal mining assets, was more like a soap opera than a FTSE 250 company.
Nat Rothschild, who co-founded Bumi with the Bakrie family, unsuccessfully challenged their ownership and management earlier this year following a well-documented fallout with the influential Indonesian owners.
Shareholders voted down his proposal to replace 12 of the 14 directors on the board.
There are fears tighter regulations could discourage foreign investment in the UK.