Nominee shareholders win basic investor rights at last

Thousands of investors have finally won basic shareholder rights, following the completion of the Company Law Reform Bill's passage through Parliament on Wednesday.

The legislation gives investors who hold their shares in nominee accounts access to almost all the same basic rights as those with direct shareholdings in companies.

Most significantly, nominee shareholders will now have a legal right to receive investor information from the companies in which they hold shares, including reports and accounts and other financial statements.

Nominee accounts are used by hundreds of thousands of small shareholders, including those who invest through tax shelters such as personal equity plans and individual savings accounts, because these are the most convenient way to hold shares electronically.

However, since shareholders in nominee accounts in effect give up legal ownership of their shares - though not the beneficial ownership - they have until now been denied many of the rights usually granted to shareholders.

Under provisions included in the Company Law Reform Bill, nominee shareholders who indicate that they wish to receive company statements will now be legally entitled to do so.

For the first time, they will also now have the right to speak and to vote at company meetings.

Gavin Oldham, the chief executive of The Share Centre, a private-client stockbroker that has been campaigning for the change in the law, said: "We are delighted - this will really make share ownership come alive for many investors."

However, Oldham warned that nominee shareholders had still not won a legal entitlement to receive the perks that about 80 companies offer to their investors, most typically discounts off the goods and services they produce. "Most companies voluntarily extend these perks to nominee shareholders," he said. "But 20 or so of them don't, and the new law still does not force them to."