On 16 May 2014, the Listing Rules are changing to incorporate new provisions applicable to premium listed companies which  have or gain a controlling shareholder.  They are being introduced to address concerns about the position of minority  shareholders and to give them a more effective voice, but without becoming dominant.

What are the key changes?

The changes include a re-instituted requirement for companies to put in place a legally binding relationship agreement with  controlling shareholders.  In this update, we focus instead on another of the new obligations - a mandatory dual process for  shareholder voting on the election of independent directors.  This will give the independent shareholders a separate voice from  controlling shareholders on the appointment of independent directors and a chance to delay the final vote (although the final  vote can be carried by a simple majority of all shareholders, as before).

What action do companies need to take?

Premium listed companies with a controlling shareholder will need to ensure their articles of association  contain an appropriate mechanism to govern and facilitate the new dual shareholder voting process on the  election of independent directors.  The rules do not specify the exact wording to be incorporated into articles.  In our  experience so far, the drafting is straightforward and, helpfully, can be confined to one area of the articles.

  • Companies seeking a premium listing (and which already have a controlling shareholder) should ensure their articles allow for  the new dual election process from the outset.
  • Existing premium listed companies (which already have a controlling shareholder) should make sure their articles allow for the  dual process, and followitin future elections orre-elections ofindependent directors. The rules afford companiestime to amend their articles if necessary.
  • What about existing premium listed companies which do not have a controlling shareholder but gain one in the future?  They  must, at that stage, amend their articles to allow for the dual process - again the rules give them time to achieve this.

The requirements in more detail

Click here to view the table.