UK - Institutional shareholders could be hindered from attending, speaking and voting at company meetings unless urgent amendments are made to the new Companies Act, the government has been warned.
In a letter to the government, seen by Global Pensions, Peter Montagnon, director of investment affairs at the Association of British Insurers, said a clause in the Act prevented institutions who physically attend meetings as corporate representatives from casting different votes on the same resolution in order to reflect the specific wishes of their individual clients.
This would impact on institutions with pension fund clients which are instructed to vote differently by various trustees one resolution. While institutions usually submit a proxy vote, and could continue to do so under the new Act, they sometimes choose to attend meetings to get their opinion across on a controversial issue, or to change their vote if discussions with the company have found a compromise.
Montagnon said while another clause in the Act appeared to override the clause which prevented institutions from casting multiple votes, it was not being accepted by most City law firms.
He warned the government that investors faced serious difficulties in supporting changes, which are now being proposed for company articles to give effect to the new Act, and said the only satisfactory answer was to amend the law.
“We need to defend an important right of institutions, but we can only do so at risk of unhealthy friction between companies and shareholders, which will increase sharply as next year’s reporting round gets under way,” he wrote.
“We have been having intensive discussions about potential solutions but the possible routes are cumbersome and flawed.”
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