Being able to exercise your individual shareholder rights is an increasingly important issue where company boards are failing shareholders, particularly in the AIM market where we continue to see examples of board ineffectiveness that need addressing
There are now platforms bringing institutional level services for individual investors e.g. Investor Meet Company is excellent and provides management access via presentations, and this MHM platform provides thoughtful (I hope!), institutional level research that is accessible to individuals as well as professional discussion boards. However, as we learn the hard way, individual investors can easily be on the receiving end of poor management and ineffective boards while not being able to make their voices heard
ShareSoc do excellent work in this area and a conversation with one of their members lead me to the following thoughts. I believe there is a need a service where individuals can collectively act and utilise their shareholder rights effectively. Board directors can continue to be ineffective until their jobs are the line, which really only happens if shareholders call for their removal. A couple of years ago I attempted as an individual to organise 5% of shareholders of an AIM listed company to call an EGM to vote for the removal of the Chairman (a situation that has recently resolved itself) and while there was appetite from investors, the current system makes it effectively impossible to organise.
The problem is:
• While individuals can vote at AGMs, the resolutions don’t include everything you may want to see, and happen once a year, so you need to be able to call an EGM or submit AGM resolutions
• As a shareholder you are entitled to a copy of the shareholder register. Good companies will just provide it to you when you can show you hold shares through a nominee, but for those companies with something to hide, they insist you buy a copy from the registrar and state they cannot see you on the register. As we all know, the broker is on the register as the nominee and in order to get on the register personally you need a CREST account which aren’t readily available and are prohibitively expensive
• Once you have the register, again you mostly see nominee accounts and can’t identify the underlying holders. Where you can identify them, the only information you get is a name and physical address
• Even if you are able to contact investors, where they aren’t on the register, they each then need to go to their broker and get a letter confirming they are the beneficial owner of shares
• If you get that far, all these individuals then need to trust you, the person organising the action, with some of their personal details for you to submit the EGM request documentation
I think the solution could be for one of the major online platforms to provide the requisite service to solve these problems, and I wrote to the CEO of Interactive Investor to suggest just this. Others may want to write to their brokers and suggest this as well. These online platforms:
• Currently provide voting for AGMs and hold shareholding information
• Could empower someone to organise individual shareholders to call for an EGM. That person could ‘commission’ the platform to provide their investors with an option to register their shares as supporting an action, in the same way they vote for AGM resolutions, while keeping all their personal details confidential
• The person organising the action could then take the single confirmation that a certain percentage of verified shareholders support the action, which would allow for a submission to the company to requisition an EGM
• All shareholders can then vote, using the current voting systems, at the EGM
In this way, individuals no longer have to hope that an institution with enough shares takes action when needed, where they are not incentivised to do so. Individuals can utilise their own rights effectively where there is someone willing to lead the effort.