It’s an interesting period in company law at the moment as Marks & Spencer has recently teamed up with the Quoted Companies Alliance (QCA), the UK Individual Shareholders Society and also the UK Shareholders Association (UKSA) to amend the Companies Act 2006 which they claim to be “outdated.” They plan to try and strengthen the rights and overall communication which apply to current shareholders throughout the country.

Marks & Spencer’s Current Stance

Marks & Spencer has made it clear that its plans are in line with the plans of the government and there is an intention to create a growing enterprise economy which is driven by both digital transformation and is underpinned by access to capital which operates via a well-functioning equity market. They stand by the idea that the current Company Law is outdated and stuck in a 40-year-old time warp.

The History of the Law and Its Problems

The current companies law was established back in the 1980s when the Government was active in putting forward a concerted programme which was designed in order to promote popular participation in capitalism, as well as the enterprise economy as a whole. Individuals were encouraged to talk about the benefits that come with investing in various businesses, in turn creating a large nation of investors. This worked at the time but currently, such a level of shareholder capitalism simply isn’t possible.

Because of the outdated system, it currently means that ordinary people who have taken the time to invest in some of the UK’s currently listed businesses do not hear from the businesses that they have invested in as there is a blatant lack of communication. The majority of individual shareholders do not have the ability to directly engage with the company that they have invested in because they use outdated paper-based systems which are steadily becoming obsolete.

The situation can be rectified and this is what Marks & Spencer’s are proposing with their nominated changes to the 2006 Companies Act.

Marks and Spencer’s Proposed Reforms

So, what are Marks and Spencer currently proposing? They have put forward the following reforms:

  • Increased two-way dialogue that takes place between both the companies and the shareholders.

There was a recent review carried out by Mark Austin which concluded that cost efficiencies which had been delivered by the intermediated system were prioritised over both transparency and corporate governance. The rights of UK shareholders will be restored if a direct link of communication is opened up by both shareholders and companies.

  • A standardised technology solution which takes place across the entire sector.

There is no getting away from the fact that innovation brought on using technology is huge for playing a role in the eventual breaking down of barriers between both public companies and their intermediaries communicating with one another.

  • Setting digital communications as a default.

If somebody is going to purchase equity in a business then there should be a prerequisite that states those people who are interested in the purchase have an email address. In the process of doing this, any online publication and any email distribution of a shareholder communication need to be validated.

  • The removal of the requirement of hard copies.

There is no longer any need for there to be hard copies of annual reports and shareholder communications produced. They don’t need to be cut off entirely if somebody would like to have access to a hard copy of an annual report at the end of the year they can, but these should no longer be produced as a default as it is a waste of paper and also not necessary when people could get access to such reports online.

  • Complete recognition of digital AGMs.

There is currently a requirement in place which states that in order for a meeting to be quorate, there have to be two qualifying persons present before the meeting can officially take place. This isn’t necessary and as such should be removed. Transparency in these meetings can still be ensured as all of the questions which are put forward throughout can be noted down and published, along with a response which can also be published on the company’s website two days after the meeting has finished.

There is no escaping the importance of digital transformation following the pandemic, it is clear that the ability to communicate remotely is of paramount importance in the modern age and this applies to ensuring that equity markets are both democratic and conductive. Every single shareholder has the right and ability to engage with the organisations that they choose to invest in and a particular focus towards digital transformation is one of the most effective ways that this can be done. As such, the campaign that has been launched by Marks & Spencer is entirely relevant.

Who Has Signed the Letter Calling for a Change?

A letter has been sent to Kemi Badenoch outlining the above-mentioned proposals that Marks and Spencer and the other organisations are calling out for. This is a part of the ‘Share Your Voice’ campaign and with the letter, representatives on behalf of the four organisations, as well as a number of executives such as Archie Norman, the chairman for Marks and Spencer, have signed it. The whole purpose is to try and encourage a two-way dialogue between different companies and shareholders so that members of the public who invest in businesses are given the opportunity to speak to different people and find out about how the company they’ve invested in are doing.

Do You Need Help Communicating with Your Shareholders?

If you need help having helpful discussions with your shareholders then there are professional organisations out there such as Leading UK who are able to help. Our team of experts will be able to get in touch with shareholders on a company’s behalf and vice versa in order to instigate financial discussions. If you have any questions or require any further information then do not hesitate to get in touch.