Lesson 9 Shareholder rights & Engagement

Question 1

What’ are the sources of shareholder power?

Answer 1

1- legislation
2-regulations
3-case law
4-corporate governance code
5-articles of association

Question 2

Name 5 shareholder rights

Answer 2

1- ownership and ability to transfer ownership

2- equal treatment of shareholders in the same share class

3- right to share in profits (dividends)

4- right to receive information

5- right to attend, request meetings and vote

Question 3

List 4 common abuses of shareholder rights

Answer 3

1-market abuse and insider dealing (FSMA s123 civil offense)

2-dilution of shares (CA 2006 protection - authorization requirement - allot shares, LT incentive scheme)

3-tunnelling - devaluation of shares (Listing Rules - notification requirement)

4-related party transactions

Question 4

Market abuse civil vs criminal offense

Answer 4

FSMA s123
Market abuse is civil offense - DIM

3 examples:
- Insider dealing
- Disclose inside info
- Market manipulation

Question 5

What is inside information

Answer 5

Specific information That would likely, if made public, have a significant effect on share price.

Question 6

Insider list

Answer 6

List of people with inside info

Identity
Reason
Date and time

Question 7

Disclosure of inside info

Answer 7

Listed companies required to inform public as soon as possible through RIS - Regulatory Information System

Question 8

Dealings by Directors

Answer 8

Directors are required to notify the company and the FCA of dealings no later than 3 working days after the date of the transaction.

And the company must notify the market no later than 2 working days after they have been informed

Persons discharging material responsibility are prohibited from transacting the company’s securities during a closed period of 30 calendar working days before year end or interim results are announced

Question 9

Why is it important to identify shareholders

Answer 9

• in order to communicate with them
• ensure they have ability to assert their rights
• so they can respond on a timely basis to hostile takeovers
• to hold management to account (ensure corporate governance is being monitored)

Question 10

Percentage of shares matters

Answer 10

3% shareholders need to inform company

5% shareholder can request meeting

10% listed companies need to notify the public (CA 2006)

25.1% - can block special resolution

50.1% - can influence decisions

75.1% - can pass special resolution

Question 11

• Responsible Investment
• Socially Responsible Investment
• ESG

Answer 11

RI - takes into consideration ESG factors and LT sustainability of Co

SRI - investment is aligned to moral or ethical principles

ESG environmental, social and governance

Question 12

Explain how to ensure shareholder engagement

Answer 12

Per the Code, the company is responsible to meet with shareholders and stakeholders and encourage their participation

• Hold General Meeting
• Chair to seek regular engagement
• SID should meet with sufficient range of major shareholders
• Board should consider ways to engage with smaller shareholders

Question 13

Explain Stewardship code

Answer 13

It is a set of 12 principles / standards (apply and explain basis) for institutional shareholders/ investors who are signatories

The main categories cover
** Purpose and governance**
** Investment approach**
** Engagement **
** Exercising rights **

Question 14

the 7 Principles of Public Life The Nolan Principles

Answer 14

the Nolan Principles are the ethical standards for those working in Public Life

SHILOO
Selfless, honesty, integrity, leadership, openness and objectivity

Objectivity,
Openness,
Honesty
Leadership,
Integrity
Selflessness
Accountability