EDITOR’S VIEW
24 May 2018 | SHARES | 3...as they may take control of a company and leave minority shareholders
out in the coldWatch out for companies
with dominant shareholders
T
he perils of having dominant
shareholders have come to the
forefront once again with
various small cap companies on the
UK market. Minority shareholders
ŚĂǀĞĞīĞĐƟǀĞůLJďĞĞŶƐŚƵŶƚĞĚƚŽŽŶĞ
side and in one case not given a fair say
ŝŶŝŵƉŽƌƚĂŶƚŵĂƩĞƌƐǁŚŝĐŚŝƐƵŶũƵƐƚ͘
For example, several companies say
they will leave the stock market and
in doing so will leave investors owning
shares they cannot sell.
Another example has seen two shareholders
ĂĐĐŽƵŶƟŶŐĨŽƌκϳйŽĨQuarto’s (QRT) stock
manage to get themselves and two other
ŝŶĚŝǀŝĚƵĂůƐĞůĞĐƚĞĚĂƐĚŝƌĞĐƚŽƌƐĂƚƚŚĞŬƐĞůůĞƌ͛Ɛ
recent AGM without having made a proposal in
ĂĚǀĂŶĐĞŽĨƚŚĞŵĞĞƟŶŐ͘
dŚĞLJƐŝĚĞͲƐƚĞƉƉĞĚƚŚĞŶŽƌŵĂůƌĞƋƵŝƐŝƟŽŶ
ƉƌŽĐĞƐƐďĞĐĂƵƐĞYƵĂƌƚŽŝƐƌĞŐŝƐƚĞƌĞĚĂƐĂĞůĂǁĂƌĞ
ĐŽŵƉĂŶLJĂŶĚŝƐƐƵďũĞĐƚƚŽĚŝīĞƌĞŶƚƌƵůĞƐƚŚĂŶ
h<ͲƌĞŐŝƐƚĞƌĞĚĮƌŵƐ͘
dŚĞƚǁŽƐŚĂƌĞŚŽůĚĞƌƐƐŝŵƉůLJŚĂĚƚŚĞƌĞƐŽůƵƟŽŶƐ
to appoint themselves and two other individuals
added to the schedule at the start of the AGM.
/ƚŵĞĂŶƚƚŚĂƚĂŶLJŽŶĞǁŚŽĐŽƵůĚŶ͛ƚĂƩĞŶĚƚŚĞ
ŵĞĞƟŶŐĂŶĚǁŚŽǁĂƐƌĞůŝĂŶƚŽŶĂƉƌŽdžLJǀŽƚĞďLJ
ƉŽƐƚĚŝĚŶ͛ƚŬŶŽǁĂďŽƵƚƚŚĞŵŽƟŽŶƚŽƌĞƉůĂĐĞ
ĨŽƵƌŶŽŶͲĞdžĞĐƵƟǀĞĚŝƌĞĐƚŽƌƐĂŶĚƐŽĐŽƵůĚŶ͛ƚ
ǀŽƚĞŽŶƚŚĞŵĂƩĞƌ͘tŚĂƚ͛ƐĂůƐŽŽĚĚŝƐƚŚĂƚƚŚĞ
ƚǁŽƐŚĂƌĞŚŽůĚĞƌƐŚŽůĚŝŶŐκϳйŽĨƚŚĞƐƚŽĐŬǁĞƌĞ
ĂůůŽǁĞĚƚŽǀŽƚĞĨŽƌƚŚĞŝƌĞůĞĐƟŽŶ͘MAKING A REAPPEARANCE
dŚĞĂĨŽƌĞŵĞŶƟŽŶĞĚƐŚĂƌĞŚŽůĚĞƌƐĂƌĞ>ĂƵƌĞŶĐĞ
KƌďĂĐŚǁŚŽǁĂƐŽƵƐƚĞĚĂƐYƵĂƌƚŽ͛ƐĐŚŝĞĨ
ĞdžĞĐƵƟǀĞŝŶϮϬϭϮďLJƚŚĞŶͲϮεйƐŚĂƌĞŚŽůĚĞƌ
,ĂƌǁŽŽĚĂƉŝƚĂů͖ĂŶĚŚƵŬ<ŝŶ>ĂƵǁŚŽŝƐĂ
ďŝŐYƵĂƌƚŽĐƵƐƚŽŵĞƌ͘
&ŝŌĞĞŶLJĞĂƌƐĂŐŽKƌďĂĐŚĨŽƵŐŚƚĂďĂƩůĞǁŝƚŚ
ĂƐƐĞƚŵĂŶĂŐĞƌ:K,ĂŵďƌŽǁŚŝĐŚƉƵƚŝŶĂƚĞŶĚĞƌŽīĞƌƚŽƚĂŬĞŝƚƐƐƚĂŬĞĨƌŽŵϮςйƚŽρϭй
ĂŌĞƌůŽƐŝŶŐĨĂŝƚŚǁŝƚŚŵĂŶĂŐĞŵĞŶƚ͘
YƵĂƌƚŽ͛ƐĞůĂǁĂƌĞĐŽŵƉĂŶLJƐƚĂƚƵƐ
ŵĞĂŶƚ:K,ĂŵďƌŽĚŝĚŶ͛ƚŚĂǀĞƚŽŵĂŬĞ
ĂĨƵůůƚĂŬĞŽǀĞƌďŝĚ͘
In a twist of irony given the latest
ĞǀĞŶƚƐ͕YƵĂƌƚŽĂƚƚŚĞƟŵĞƐĂŝĚƚŚĞ
ƚĞŶĚĞƌŽīĞƌǀŝŽůĂƚĞĚĨƵŶĚĂŵĞŶƚĂů
principles of the Takeover Code (which
ĚŽĞƐŶŽƚĂƉƉůLJƚŽYƵĂƌƚŽĂƐĂĞůĂǁĂƌĞ
ĐŽƌƉŽƌĂƟŽŶͿďLJ͚ĨĂŝůŝŶŐƚŽƚƌĞĂƚĂůů
ƐŚĂƌĞŚŽůĚĞƌƐĞƋƵĂůůLJ͛͘
Fund manager Paul Mumford of Cavendish Asset
Management is one of the annoyed shareholders
ǁŚŽŚĂƐĐŽŵĞĨŽƌǁĂƌĚƚŽĐŽŵƉůĂŝŶĂďŽƵƚƚŚĞ
ůĂƚĞƐƚĞǀĞŶƚƐ͘,ĞŝƐĂůƐŽĨƌƵƐƚƌĂƚĞĚďLJƚŚĞǁĂLJ
YƵĂƌƚŽůĂƐƚLJĞĂƌĨĂŝůĞĚƚŽƉƵƚĂƚĂŬĞŽǀĞƌĂƉƉƌŽĂĐŚ
to shareholder vote.
͚dŚŝƐƌĞƉƌĞƐĞŶƚƐĂŶĞŐƌĞŐŝŽƵƐĐĂƐĞŽĨŵŝŶŽƌŝƚLJ
ƐŚĂƌĞŚŽůĚĞƌŝŶƚĞƌĞƐƚƐďĞŝŶŐƐƚĞĂŵƌŽůůĞƌĞĚŽŶƚŚĞ
sly. A cynical person would look at this and call it a
ƚĂŬĞŽǀĞƌŽŶƚŚĞĐŚĞĂƉ͕ǁŝƚŚĂŶŝŶͲďƵŝůƚĐŽŶŇŝĐƚŽĨ
ŝŶƚĞƌĞƐƚĂƐƚŚĞĐŚĞƌƌLJŽŶƚŚĞĐĂŬĞ͕͛ƐĂLJƐDƵŵĨŽƌĚ͘
͚>ŽŽŬŝŶŐĂƚƚŚĞŶĞǁďŽĂƌĚŵĂŬĞƵƉ͕ŝƚƐĞĞŵƐ
ŝŶĞǀŝƚĂďůĞƚŚĂƚŵŝŶŽƌŝƚLJƐŚĂƌĞŚŽůĚĞƌƐǁŝůůŶŽǁĮŶĚ
their interests sidelined. On the other hand given
ƚŚĂƚƚŚĞĐŽŵƉĂŶLJ͛ƐƉĞƌĨŽƌŵĂŶĐĞŝƐůĞƐƐƚŚĂŶƐƚĞůůĂƌ͕
it is good to see some shareholders playing an
ĂĐƟǀĞƌŽůĞ͛͘MORALLY WRONG
KŶĞĐŽƵůĚĂƌŐƵĞƚŚĂƚKƌďĂĐŚ͛ƐůĂƚĞƐƚŵŽǀĞǁĂƐ
ƚŚĞĨĂƐƚĞƐƚǁĂLJƚŽƌĞŐĂŝŶĂƐĞĂƚĂƚƚŚĞƚĂďůĞŽĨƚŚĞ
ďƵƐŝŶĞƐƐŚĞĐůĞĂƌůLJůŽǀĞƐ͕ŚĂǀŝŶŐƐƉĞŶƚϯςLJĞĂƌƐŝŶ
ĐŚĂƌŐĞ͘ƵƚŵŽƌĂůůLJŝƚĚŽĞƐŶ͛ƚƐĞĞŵƌŝŐŚƚ͘/ƚĐŽŵĞƐ
across as self-serving and not in the spirit of good
corporate governance.
tŚŝůĞƚŚĞƌĞŝƐĐůĞĂƌůLJŵŽƌĞŽĨƚŚŝƐƐƚŽƌLJƚŽďĞ
ƚŽůĚ͕ŝƚĚŽĞƐŶ͛ƚĞdžĐƵƐĞƚŚĞƉŽŽƌŵĂŶŶĞƌŝŶŚŽǁ
ŵŝŶŽƌŝƚLJƐŚĂƌĞŚŽůĚĞƌƐŚĂǀĞďĞĞŶƚƌĞĂƚĞĚŶŽǁĂŶĚ
ŝŶƚŚĞƉĂƐƚ͘;Ϳ