The Association of Investment Companies (AIC) has written to the Financial Conduct Authority (FCA) and the Department for Business and Trade (DBT) demanding measures to protect shareholders following Saba Capital’s call for a third meeting to remove the board of Edinburgh Worldwide (EWI).
The trade body, which represents 276 London-listed investment companies with assets of around £268bn, said there should be a limit to the number of times one shareholder can requisition a meeting to vote on the same resolutions.
The AIC fears that unless steps are taken activist investors like Saba may be able to wear down shareholders with repeated votes. Saba, which owns 30.7% of EWI shares, has proposed a third general meeting to vote for three of its nominees to the EWI board and sack its current directors, even though a majority of shareholders have rejected this twice – last month and a year ago.
Yesterday, in response to criticism over its move, Saba said it would support a new EWI board offering unhappy shareholders a full cash exit at close to asset value.
AIC chief executive Richard Stone said: “It’s time for the regulator and government to get to grips with the threat that Saba poses and act to support UK companies. Is it fair that an investment trust needs to achieve repeated record turnouts to avoid Saba taking control against the wishes of the vast majority of all other shareholders?”
He added: “The current legislation does not give boards sufficient powers to stop the same proposals being brought forward repeatedly by a single shareholder when they have already been rejected. This creates a distraction and cost to the detriment of other shareholders.”
Steps the AIC wants taken to defend shareholders’ rights and ensure a fair and democratic process include:
- Changing the related parties’ rules so that directors nominated by a significant shareholder must win the support of other shareholders;
- Requiring nominated directors to explain their plans and be questioned by shareholders;
- Allow platforms to give investors the option of saying their shares should be automatically voted in a particular way, for example in line with the board’s recommendations.
“We urge the regulator and government to take action to support investment trusts and other UK companies from persistent attacks and protect retail shareholders,” Stone said.
