Thursday, October 4, 2012
I suppose that will happen when a large, influential company with a controlling shareholder finds itself in the middle of a phone hacking scandal. That said, the proposed changes to the FSA listing standards are at first glance a relatively extreme move against the power of controlling shareholders.
The FSA proposes to further strengthen the Listing Regime by adopting greater corporate governance requirements for companies with a dominant shareholder. The FSA will increase the tools available to independent shareholders to influence the governance of the companies in which they have invested. These proposals include:
- introducing the concept of a ‘controlling shareholder’;
- requiring an agreement is put in place to regulate the relationship between such a shareholder and the listed company;
- and ensuring that this agreement is complied with on an ongoing basis. This will ensure that the company is managed independently from that shareholder.
The FSA also recognises the important role that the independent directors play in these circumstances. Therefore it will also insist on a majority of independent directors on the board where a controlling shareholder exists and introduce a new dual voting procedure to allow independent shareholders to have more say in their appointment.
The idea here appears to be to take the "control" out of controlling shareholders and put more power to elect directors in the hands of minority/non-controlling shareholders. That's a pretty big move. By isolating controlling shareholders from the boards of the companies that presumably own, that would change the nature of a control position. I know the phone hacking scandal was bad, but this seems like an over-reaction. So, going forward if you own more than 50% of the stock of a UK listed firm, you'll have scarcely more influence over the direction of the firm than a minority shareholder? I wonder whether, following implementation of these listing standards, control premiums will go down for UK listed companies. Worth following as this develops.
Wednesday, October 3, 2012
It is one of those things that rarely happens in an M&A deal. Late last week, President Obama issued an order prohibiting Ralls Corporation, a U.S. affiliate of the Chinese machinery manufacturer Sany Group, from acquiring four U.S. wind farm project companies. The wind farms are near restricted air space the U.S. Navy uses for flight training. President Obama’s order followed a recommendation from the Committee on Foreign Investment in the United States (CFIUS), an inter-agency group headed up by the Treasury Department that evaluates the national security risks of foreign investments in U.S. companies or operations. See here for the Treasury Department’s press release on the order. WilmerHale also has a useful short release on this rather unusual Presidential action.
Reuters reports that Ralls has sued CFIUS and the President, although the chance of a successful suit is really slim given the President’s broad authority on national security matters. It will be interesting to see whether the court will even entertain Ralls’ arguments. The case is Ralls Corp. v. Committee on Foreign Investment in the U.S., 1:12-cv-01513, U.S. District Court, District of Columbia (Washington).
Tuesday, October 2, 2012
Monday, October 1, 2012
Whenever a new lawyer asks me the key to being a successful practioner, one thing tops my list. Mark Herrmann lays it out very well here.
His last line is something that has always baffled me, because, as he notes, there's nothing to it. So why do so many people mess this up?