Shareholders miss out on perks as Bill leaves a loophole
Despite 10 years of lobbying, it is still legal for companies to deny shareholders rights, reports David Prosser
Saturday 05 November 2005
New laws supposed to force companies to improve the way they are run will not stop millions of small investors losing out on basic shareholder rights, experts warn. The Company Law Reform Bill, published by the Department of Trade and Industry on Thursday, will still allow large companies to deny many shareholders a say in their running. Many investors will also continue to miss out on the valuable perks that companies offer most of their shareholders.
Private client stockbrokers that buy and sell shares for small investors have been lobbying the DTI to change the law on "nominee accounts" for more than 10 years. Most brokers use the accounts as the cheapest and simplest way to trade on behalf of individuals, but with nominees, their name, rather than yours, appears on company's shareholder registers.
Under current company law, only shareholders whose names are listed on these registers are entitled to the rights usually granted to shareholders. These include the right to vote at company meetings and to receive reports and accounts, for example. The same rules govern which shareholders receive the perks that many companies offer their investors.
After some intensive lobbying, the new regulations will for the first time allow companies to recognise nominee account shareholders. But there is no requirement for them to do so.
"Companies will now choose whether or not to extend these basic rights to shareholders and it is questionable whether they will do so," says Gavin Oldham, chief executive of The Share Centre, which specialises in dealing on behalf of small investors. "The new law gives the DTI reserve powers to insist that companies recognise all their shareholders, but there has been no guidance on whether these powers will ever be enforced."
Around 24 million nominee accounts now exist in the UK and many companies argue that the cost of servicing these shareholders would be too high. "The DTI is nervous about complaints from companies about red tape," warns Oldham. "If the new bill stays as it is, there is a grave danger nothing will change, even though these are individual shareholders who should have the same rights as everyone else."
Some brokers still allow investors to deal using paper share certificates, which ensures they end up on company registers. The alternative is to become a sponsored member of Crest, the London Stock Exchange's electronic share dealing settlement system. This also allows investors to hold shares in their own name.
However, in both cases, dealing fees will be significantly higher - investors may even have to pay a one-off fee to join Crest. And certificated share dealing is much slower because investors must rely on the postal service to send and receive the paper.
Some investors are angry about losing their voting rights, but missing out on shareholder perks can substantially reduce the attraction of holding a stock. While it never makes sense to invest in a share simply to get a perk, the discounts and freebies offered by many companies can be very valuable.
All sorts of companies offer perks. The housebuilder Persimmon, for example, gives shareholders up to £3,000 off the price of new properties. Bloomsbury Publishing offers a third off the cover price of all its publications, including the Harry Potter series. Retailers offering shareholders discounts on products range from Next to Mothercare, while holiday companies also provide some generous perks. BA, in particular, offers shareholders and up to five companions 10 per cent off the price of domestic flights.
Angela Knight, chief executive of the Association of Private Client Investment Managers and Stockbrokers, says that many investors feel let down by the DTI's failure to act on their behalf. "The CBI has been lobbying against extending rights to nominee shareholders, on the grounds of cost," she says. "But we have suggested that companies could be given the right to send out reports and accounts electronically in return for extending shareholder rights, and that would actually save them money."
Some of the best shareholder perks
Barratt Developments: shareholders get a £500 reduction on each £25,000 of the price of a new or part-exchange house in the UK or the US.
De Vere: shareholders get a discount card to use in its hotels, slashing 35 per cent off the cost of accommodation.
Dobbies Garden Centres: shareholders can claim a 10 per cent discount on most of the company's products.
Eurodisney: shareholders are entitled to 15 per cent off the entry fees to parks, as well as discounts on meals and 10 per cent off the cost of hotel accommodation.
Eurotunnel: shareholders get up to 30 per cent off fares.
Lookers: shareholders get £100 off the cost of a new car.
Mulberry: shareholders get 20 per cent off all products bought in the luxury fashion chain's shops.
The Restaurant Group: shareholders can claim 25 per cent off the cost of a meal for up to 10 people in Garfunkel's, Chiquito, Frankie & Benny's, Caffé Uno and Est Est Est.
Donald MacInnes: 'I have to have £500 a month spare from now until at least 2035'
HSBC becomes first bank to offer five-year fixed rate mortgage with interest rate under 2%
Are finance apps stealing your personal data?
Crippling PFI deals leave Britain £222bn in debt
Pension freedoms: How to deal with cold calls from scammers
- 1 Rarest Beanie Baby bought for just £10 at car boot sale could be sold for £62,500 on eBay
- 3 Giorgio Armani criticises the way some gay men dress saying 'a man has to be a man'
- 4 Rebecca Francis accuses Ricky Gervais of using 'influence' to target female hunters after receiving barrage of death threats
- 5 Australian student Tommy Connolly, 23, adopts his pregnant, homeless 17-year-old cousin to give her a chance at 'a better life'
If I’m being racially abused I don’t need a stranger with a saviour complex to rescue me
The only black face in the Ukip manifesto is on the page about overseas aid
Ukip is the only main political party to not address LGBT rights in its manifesto
Food banks: One million Britons will soon be using them, according to Trussell Trust
Religion isn't growing, it is becoming vigorous in its demise, says philosopher AC Grayling
BBC election debate: The one photo that summed up the whole 90-minute leaders debate
iJobs Money & Business
£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...
£30 - 35k (DOE): Guru Careers: We are seeking a Pricing Analyst with experienc...
£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...
£21000 - £24000 per annum: Ashdown Group: The Ashdown Group has been engaged b...
Day In a Page
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
This four-bedroom home has exposed brick chimneys and a vaulted ceiling in a breakfast room that's ideal for summer entertaining - the doors open to the patio and garden.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
A boutique mews house, set around a central courtyard, with three bedrooms and a private roof terrace
A four-bedroom farm-conversion with three bathrooms and two reception rooms
A two-bedroom detached house with ensuite bathrooms and a sun-drenched decked terrace, £750,000
A modern and spacious two-bedroom, penthouse flat with two bathrooms in a prestigious development
A beautifully renovated five-bedroom terrace with three reception rooms and a courtyard garden, £700,000