The Institute of Chartered Secretaries and Administrators (ICSA) has published guidance on Part 9 of the Companies Act 2006 which sets out new rules on the rights of so-called indirect investors. While the term "indirect investor" does not appear in Part 9 of the Act, it does appear in the Explanatory Notes to the Act published by the Government and is intended to refer to a person on whose behalf a registered shareholder holds shares (for example, a retail shareholder in a publicly traded company who holds his or her shares through a broker or custodian). The new Part 9 rules aim to improve communication between companies and indirect investors and make it easier for investors to exercise their rights fully and responsibly.
Under the new rules, registered shareholders of companies can nominate third parties to enjoy or exercise all or any specified rights of the registered shareholder (including rights to receive notices of, and to vote at, general meetings) provided this is authorised by the company's articles of association.
In addition, members of companies whose shares are traded on a regulated market (which includes the main market of the London Stock Exchange but not AIM) can nominate a third party to enjoy "information rights" including, the right to receive copies of all communications sent to shareholders generally.
The ICSA guidance considers, in particular, some of the practical administrative issues which will be faced by interested parties in working with the new provisions and suggests "best practice" solutions which seek to deal with these issues. The best practice recommendations published by ICSA include recommendations as to:
- a common file format that registered shareholders are encouraged to use when making nominations for information rights;
- what information ought to be captured and maintained by a company in respect of each indirect investor for whom a nomination has been received; and
- what processes and checks a registered shareholder ought to put in place before making a nomination.
A copy of the guidance note can be found on the ICSA website.