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

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.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Life and Style
Powdered colors are displayed for sale at a market ahead of the Holi festival in Bhopal, India
techHere's what you need to know about the riotous occasion
Arts and Entertainment
Larry David and Rosie Perez in ‘Fish in the Dark’
theatreReview: Had Fish in the Dark been penned by a civilian it would have barely got a reading, let alone £10m advance sales
News
Details of the self-cleaning coating were published last night in the journal Science
science
News
Approved Food sell products past their sell-by dates at discounted prices
i100
News
Life-changing: Simone de Beauvoir in 1947, two years before she wrote 'The Second Sex', credited as the starting point of second wave feminism
peopleHer seminal feminist polemic, The Second Sex, has been published in short-form to mark International Women's Day
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Evening Administrator

    £8 per hour: Recruitment Genius: This Pension Specialist was established early...

    Guru Careers: Executive Assistant / PA

    £30 - 35k + Bonus & Benefits: Guru Careers: We are seeking an Executive Assist...

    Ashdown Group: Graduate Application Support Analyst

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Reach Volunteering: External Finance Trustee Needed!

    Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

    Day In a Page

    Homeless Veterans campaign: Donations hit record-breaking £1m target after £300,000 gift from Lloyds Bank

    Homeless Veterans campaign

    Donations hit record-breaking £1m target after huge gift from Lloyds Bank
    Flight MH370 a year on: Lost without a trace – but the search goes on

    Lost without a trace

    But, a year on, the search continues for Flight MH370
    Germany's spymasters left red-faced after thieves break into brand new secret service HQ and steal taps

    Germany's spy HQ springs a leak

    Thieves break into new €1.5bn complex... to steal taps
    International Women's Day 2015: Celebrating the whirlwind wit of Simone de Beauvoir

    Whirlwind wit of Simone de Beauvoir

    Simone de Beauvoir's seminal feminist polemic, 'The Second Sex', has been published in short-form for International Women's Day
    Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

    Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

    Why would I want to employ someone I’d be happy to have as my boss, asks Simon Kelner
    Confessions of a planespotter: With three Britons under arrest in the UAE, the perils have never been more apparent

    Confessions of a planespotter

    With three Britons under arrest in the UAE, the perils have never been more apparent. Sam Masters explains the appeal
    Russia's gulag museum 'makes no mention' of Stalin's atrocities

    Russia's gulag museum

    Ministry of Culture-run site 'makes no mention' of Stalin's atrocities
    The big fresh food con: Alarming truth behind the chocolate muffin that won't decay

    The big fresh food con

    Joanna Blythman reveals the alarming truth behind the chocolate muffin that won't decay
    Virginia Ironside was my landlady: What is it like to live with an agony aunt on call 24/7?

    Virginia Ironside was my landlady

    Tim Willis reveals what it's like to live with an agony aunt on call 24/7
    Paris Fashion Week 2015: The wit and wisdom of Manish Arora's exercise in high camp

    Paris Fashion Week 2015

    The wit and wisdom of Manish Arora's exercise in high camp
    8 best workout DVDs

    8 best workout DVDs

    If your 'New Year new you' regime hasn’t lasted beyond February, why not try working out from home?
    Paul Scholes column: I don't believe Jonny Evans was spitting at Papiss Cissé. It was a reflex. But what the Newcastle striker did next was horrible

    Paul Scholes column

    I don't believe Evans was spitting at Cissé. It was a reflex. But what the Newcastle striker did next was horrible
    Miguel Layun interview: From the Azteca to Vicarage Road with a million followers

    From the Azteca to Vicarage Road with a million followers

    Miguel Layun is a star in Mexico where he was criticised for leaving to join Watford. But he says he sees the bigger picture
    Frank Warren column: Amir Khan ready to meet winner of Floyd Mayweather v Manny Pacquiao

    Khan ready to meet winner of Mayweather v Pacquiao

    The Bolton fighter is unlikely to take on Kell Brook with two superstar opponents on the horizon, says Frank Warren
    War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

    Baghdad fights to win back Tikrit from Isis – but then what?

    Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable