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Team Captain
5pc instead of 100
By Robert Clow
08-02-2005
THE Federal Government has proposed legislation to abolish the
controversial "100 member rule" that allows 100 shareholders of a
company to call a special general meeting.
But despite its contentious subject matter, the new legislation
received widespread support for the line it treads between reining in
small shareholder power and protecting minority interests.
Under the rules proposed by Parliamentary Secretary to the Treasurer
Chris Pearce, a minimum of 5 per cent of total voting shares would be
required to call a meeting - rather than the current 100 shareholders.
"We strongly support the 5 per cent rule," said the chief executive of
the Investment and Financial Services Association, Richard Gilbert.
"Overall, the package is sensible. It is about protecting underlying
shareholder wealth and not having it whittled away."
IFSA members hold 26-27 per cent of the Australian stock market's
capitalisation, representing $770 billion of investor money, and are
concerned about the expense of the special general meetings.
However, smaller shareholders are concerned about their rights.
"I am concerned that one of Chris Pearce's first statements is such a
dramatic one," said Stuart Wilson, executive officer of the Australian
Shareholders Association, which has fought hard to protect the 100
member rule in the past.
"Our main concern is that it is almost as if it sets a trend for the
removal of individual shareholder rights, which we would hate to see
progressed."
Mr Wilson was somewhat mollified by the new rules also proposing the
lowering of the number of shareholders required to put a resolution to
an annual general meeting from 100 to 20.
"I think it does go some way to balancing the interests of small
shareholders," he said.
Mr Pearce said: "It is a matter of finding the right balance. Six or
seven things significantly enhance shareholder rights.
"That is quite an improvement. There have been examples of the
vexatious use of the 100 member rule." An example of what might be
considered a vexatious use of the rule was the special general meeting
in August 2003 of the forestry company Gunns. Just 0.4 per cent of the
57 million proxy votes supported the resolution put to the meeting by
the Wilderness Society.
This hijacking of the corporate agenda by a narrow, unrepresentative
group was arguably as big a problem with the current rules as the
multi-million dollar expense of big general meetings.
"To have 100 shareholders (calling a meeting) in a register where
there could be 600,000 shareholders is not sufficiently broad," said
Richard Alcock, a partner of Allens Arthur & Robinson and head of the
law firm's corporate governance practice. "It is a pretty big
undertaking to convene a meeting and go through all those processes
when the votes in support of the resolution at the meeting can be
really quite low."
Mr Alcock was in favour of the balance Mr Pearce has tried to strike
between cutting back and enhancing small shareholder rights. "I think
it is a good compromise," he said.
By Robert Clow
08-02-2005
THE Federal Government has proposed legislation to abolish the
controversial "100 member rule" that allows 100 shareholders of a
company to call a special general meeting.
But despite its contentious subject matter, the new legislation
received widespread support for the line it treads between reining in
small shareholder power and protecting minority interests.
Under the rules proposed by Parliamentary Secretary to the Treasurer
Chris Pearce, a minimum of 5 per cent of total voting shares would be
required to call a meeting - rather than the current 100 shareholders.
"We strongly support the 5 per cent rule," said the chief executive of
the Investment and Financial Services Association, Richard Gilbert.
"Overall, the package is sensible. It is about protecting underlying
shareholder wealth and not having it whittled away."
IFSA members hold 26-27 per cent of the Australian stock market's
capitalisation, representing $770 billion of investor money, and are
concerned about the expense of the special general meetings.
However, smaller shareholders are concerned about their rights.
"I am concerned that one of Chris Pearce's first statements is such a
dramatic one," said Stuart Wilson, executive officer of the Australian
Shareholders Association, which has fought hard to protect the 100
member rule in the past.
"Our main concern is that it is almost as if it sets a trend for the
removal of individual shareholder rights, which we would hate to see
progressed."
Mr Wilson was somewhat mollified by the new rules also proposing the
lowering of the number of shareholders required to put a resolution to
an annual general meeting from 100 to 20.
"I think it does go some way to balancing the interests of small
shareholders," he said.
Mr Pearce said: "It is a matter of finding the right balance. Six or
seven things significantly enhance shareholder rights.
"That is quite an improvement. There have been examples of the
vexatious use of the 100 member rule." An example of what might be
considered a vexatious use of the rule was the special general meeting
in August 2003 of the forestry company Gunns. Just 0.4 per cent of the
57 million proxy votes supported the resolution put to the meeting by
the Wilderness Society.
This hijacking of the corporate agenda by a narrow, unrepresentative
group was arguably as big a problem with the current rules as the
multi-million dollar expense of big general meetings.
"To have 100 shareholders (calling a meeting) in a register where
there could be 600,000 shareholders is not sufficiently broad," said
Richard Alcock, a partner of Allens Arthur & Robinson and head of the
law firm's corporate governance practice. "It is a pretty big
undertaking to convene a meeting and go through all those processes
when the votes in support of the resolution at the meeting can be
really quite low."
Mr Alcock was in favour of the balance Mr Pearce has tried to strike
between cutting back and enhancing small shareholder rights. "I think
it is a good compromise," he said.
