The need for companies to know their shareholders – and the potential penalties on shareholders who provide inaccurate responses.
The Court of Appeal recently held in JKX Oil & Gas plc v Eclairs Group Limited that a board's power to prevent shareholders from voting at a general meeting, exercised by the board in the belief that such shareholders had responded inaccurately to notices for requests for information, may be exercised by the board regardless of the purpose for which that power was exercised.
Relevance for private limited companies
- This judgment related to the service by a premium listed company of a request for information about interests in its shares, known as a section 793 notice, on certain of its shareholders – but it may well become relevant for private limited companies too
- This is because the Government plans to introduce a register of persons with significant control for all UK companies, whereby all companies will be under an obligation to take steps to identify their major beneficial owners and to maintain a register of such owners
- To give companies the necessary power to do so, the Government is proposing to extend the provisions giving public limited companies the ability to require information about their shares to private limited companies (with some modifications)
Relevance for premium listed companies
- For premium listed companies, the use of section 793 notices is likely to increase in scope and importance given the recent enactment of the Listing Rules (Listing Regime Enhancements) Instrument 2014
- Pursuant to these rules, premium listed companies are now under an obligation to enter into relationship agreements with controlling shareholders containing certain provisions safeguarding the company's independence
- A "controlling shareholder" is defined as any person who exercises or controls 30% or more of the voting rights, either on their own or with a person with whom they are acting in concert
- As such, premium listed companies are under an obligation to take steps to identify any concert parties who are interested in their shares with whom their shareholders are acting in concert, which they are able to do with the use of their powers under section 793
Relevance for shareholders
- Shareholders who receive section 793 notices should be aware that they are at risk of being disenfranchised if they do not respond to such notices with accurate information
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.