Companies Act 2006 - Public and Listed Companies

Public and Listed Companies

The Act also seeks to promote greater shareholder involvement, and a number of new requirements are introduced for public companies, some of the provisions of which only apply to companies whose shares are listed on the main board of the London Stock Exchange (but, importantly, not to companies whose shares are listed on AIM).

• Business review - the Act imposes additional requirements for companies listed on the main board of the LSE in their annual report and accounts. These now include:

1. main trends and factors likely to affect future development, performance and position of the business;
2. information on environmental matters, employees and social issues; and
3. information on contractual and other arrangements essential to the company's business.

• AGM and accounts - main list companies will be required to hold their AGM and file accounts within 6 months of the end of the financial year. They will also be required to:

1. publish their annual report and accounts on their website;
2. disclose results of polled votes at general meetings on their website;
3. give certain minority shareholders the right to require independent scrutiny of any polled vote, the results of which must be published on the company's website.

• Political donations and expenditure - the Act contains simplification and clarification of the existing provisions requiring shareholder approval for political donations and expenditure, and clarifies a number of grey areas (such as expenditure relating to trade unions).
• Enfranchising indirect investors - nominee shareholders of main list companies will be able to nominate persons on behalf of whom they hold shares to receive copies of company communications and annual reports and accounts. All companies will also be able to include provisions in their articles to identify some other party to exercise additional rights of the shareholder. This is to address the concern that shares in publicly listed companies are frequently held in an intermediary's name, which makes it more difficult for the beneficial owners of the shares to exercise their rights as shareholder.
• Voting by institutions - the Act empowers the government to introduce regulations in the future that would require institutions to disclose how they have voted. The government has indicated it will only introduce such regulations after full consultation and if a voluntary disclosure scheme does not work.
• Paperless share transfers - the Act gives the government power to make regulations requiring (as well as permitting) paper-free holding and transferring of shares in main list companies. Some law firms have expressed reservations as to how paper-free holding and transfers would work in practice.
• Transparency Obligations Directive - the Act brings into force the European Directive imposing obligations on main list companies in relation to financial reporting, disclosure of major acquisitions or disposals of its shares and the dissemination of information about the company to its shareholders and the public generally. The Act gives the Financial Services Authority power to make rules to implement the requirements of the Directive, which would be implemented by way of changes to the existing Listing Rules and Disclosure Rules. The Act also introduces a statutory compensation scheme for misleading or inaccurate statements in reports.
• Takeovers - the EU Takeover Directive was implemented by interim regulations in the United Kingdom in May 2006. The Act extends the statutory basis for the regulations in relation to certain matters, such as the statutory footing of the Takeover Panel, and the City Code on Takeovers and Mergers. It also extended the "minority sweep up" provisions which were introduced by an amendment to the Companies Act 1985, and addresses certain practical problems which had arisen in relation to their operation.