Shake-up to protect minority investors

The Financial Conduct Authority (FCA) said yesterday new measures to be introduced next year would include a requirement for companies in which one shareholder owns more than 30 percent to have a “relationship agreement” in place to ensure they can operate independently from that shareholder.

Investigations into alleged irregularities at Kazakh mining group ENRC, which listed in London in 2007, and Indonesia-focused Bumi, listed in 2011, have raised questions over their route to market and damage done to the interests of minority shareholders.

Both companies, at least initially, had significant shareholders with controlling shares – ENRC was controlled by its trio of founding shareholders and the Kazakh government, while Bumi was effectively controlled by the Bakrie family which co-founded it.

ENRC is now set to delist from the London Stock Exchange after a buyout by the founders and the Kazakh government.

The FCA said it would set minimum requirements for relationship agreements, which for example ensure that independent shareholders could have the ability to veto transactions between a business and its main owner.

Many companies with majority shareholders already have relationship agreements, but shareholders have often complained they are either ignored or ineffective.

Bumi, for example, did have a relationship agreement with the Bakrie family, but that 2011 deal allowed the family to nominate the chairman, chief executive and chief financial officer.

The rules, first proposed by the FCA’s predecessor the Financial Services Authority, will apply to companies with a “premium” listing.