Chapter 14+15. SH rights and engagement + Board

Question 1

List seven sources of the power and rights of shareholders

Answer 1

1. Legislation
2. Regulations
3. Case law
4. Corporate governance codes
5. Articles of association
6. Resolutions passed at general meetings
7. Shareholder agreements

Question 2

List six rights of shareholders

Answer 2

1. Ownership and the transfer
2. Equal Treatment
3. Share in the profits
4. Receipt of information
5. Attend meetings, request meetings and vote
6. Enfranchising indirect shareholders

Question 3

List four common abuses of shareholders rights

Answer 3

1. Market abuse and insider dealing
2. Dilution
3. Tunnelling
4. Related Party Transactions

Question 4

What are the three types of market abuse?

Answer 4

1. Engaging or attempting to engage in insider dealing
2. Unlawfully disclosing inside information
3. engaging in or attempting to engage in market manipulation

Question 5

Under the Criminal Justice Act 1993, what are the three insider dealing offences?

Answer 5

1. dealing in securities on the basis of inside information;
2. encouraging another to engage in such dealing; and
3. disclosing inside information otherwise than in the proper performance of one’s employment, office or profession.

Question 6

List three defences to the offence of Insider dealing

Answer 6

1. that the defendant did not, at the time of the disclosure, expect any person to deal because of the disclosure or
2. alternatively that he did not expect any such dealing to result in a profit attributable to the price sensitivity of the information.
3. that the defendant would have dealt in the same way even if he had not had the information.

Question 7

What is the definition of a PDMR

Answer 7

A Person Discharging Managerial Responsibility (PDMR) is defined as a person within an issuer who is:

1. a member of the administrative, management or supervisory body of that entity (e.g. a director)
2. a senior executive who is not a director but has regular access to inside information

Question 8

What are the rules relating Dealings by Directors and PDMRs

Answer 8

1. PDMRs and PCAs are required to notify the company and the FCA of any dealings in its shares no later than three working days after the date of the transaction. (Transaction must reach EUR 5,000 in the calendar year)
2. On receipt of such a notification, the company is required to make an announcement to the market no later than two working days after they have been informed of the transaction
3. PDMRs are prohibited from conducting any transactions in the company’s securities during a closed period of 30 calendar days before the announcement of the year-end results or any interim financial report.
4. In certain exceptional circumstances, a company can allow a PDMR to deal during a closed period

Question 9

List three limitations of an annual general meeting

Answer 9

1. Only held once a year
2. The location may make it difficult for shareholders to attend
3. Limited time duration

Question 10

List 4 benefits of electronic communication between companies and shareholders

Answer 10

1. Cheaper
2. Environmental
3. Faster and more reliable
4. Enables better engagement with Foreign shareholders
5. Improves voting participation