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.
Durham Free School: 'Creationism taught at' free school facing closure
Nearly 100,000 of Britain's poorest children go hungry after parents' benefits are cut
End of the licence fee: BBC to back radical overhaul of how it is funded
Nigel Farage promises Ukip will not 'stigmatise' would-be migrants – and says he wants 'everyone to speak the same language'
Ex-head of MI6: 'We shouldn't kid ourselves that Russia is on a path to democracy'
Most people think legal tax avoidance is just as wrong as illegal tax evasion, poll suggests
iJobs Money & Business
£8 per hour: Recruitment Genius: This Pension Specialist was established early...
£30 - 35k + Bonus & Benefits: Guru Careers: We are seeking an Executive Assist...
£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...
Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...
Day In a Page
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 deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
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
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads