Minority shareholders are to be granted new powers to protect them against dominant investors who attempt to bend companies to their will.
The Financial Services Authority has drafted proposals for new listing rules in the wake of a number of scandals, largely involving natural resources companies, which have seen controlling shareholders attempt to ride roughshod over their fellow investors.
The most high-profile was ENRC, the Kazakh mining company once described as "more Soviet than City" by an ousted director.
In future, if a company has a shareholder considered to exert a "controlling influence", it will not be able to fire directors it does not like without securing the approval of a majority of smaller shareholders.
The same will apply to appointments to the board, which will have to be approved by minorities. Companies with controlling shareholders will also have to have a majority of directors considered as "independent" under the Combined Code on Corporate Governance.
The Financial Services Authority has further warned companies seeking to list in Britain that it is unlikely to approve requests from their owners to sell off less than 20 per cent of their shares on the London Stock Exchange. FTSE International, which compiles the City's main indices including the FTSE 100, 250 and the FTSE All Share, already demands that companies have a "free float" of at least 25 per cent for inclusion.
This is important because being included in an index means access to a wide range of investors, including index tracking funds held by many small savers and pension funds.
Companies willing to accept listing without "premium" status will be granted more leeway by regulators, however.
David Lawton, the FSA director of markets, said: "We believe that these proposals will strengthen the investor protections afforded by the Listing Regime, particularly for companies with controlling shareholders.
"Of course, it is primarily the responsibility of shareholders to use these new provisions effectively"Reuse content