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Myners calls for shareholder rights

More active shareholder engagement is the key to listed companies being able to raise capital for growth, an independent report claims.

An investigation into shareholder rights by Paul Myners, chairman of Marks & Spencer and a former chairman of Gartmore Investment Manage-ment, makes recommendations designed to aid innovation and business growth.

The report focuses on pre-emptive rights, which are the rights of current shareholders to maintain their fractional ownership of a company by buying a proportional number of shares of any future issue of common stock.

Myners recommends these guidelines should be replaced by new guidance with emphasis on a case-by-case engagement between the company and shareholders. He defends the principle of shareholders having pre-emption rights, in the wake of criticism that it could constrain growth by stalling investment.

He says: “There is an opportunity here for all parties to benefit, preserving the principle of shareholders’ rights to pre-emption while delivering companies the flexibility they need to raise capital in ways that are most appropriate to their circumstances.”

Association of Investment Trust Companies director general Daniel Godfrey says: “Dialogue provides the best means of ensuring the needs of shareholders and managers are effectively reconciled. This requires commitment from the investment community and company managers but will deliver real benefits.”

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