I was shocked to find I couldn’t vote on the Unilever move abroad because I hold the shares electronically.
How do I make sure I can exercise my right to vote the next time one of the companies I have shares in wants to do something like this?
Exercising your vote: How do you ensure you get a say in the business of a company you own shares in electronically, rather than on paper?
Tanya Jefferies, of This is Money, replies: Many individual Unilever shareholders were upset at the difficulty they faced over voting on the company’s plan to move its headquarters from London to Rotterdam in the Netherlands.
In the end, the proposal was scrapped before it reached a vote due to opposition from some of the consumer goods giant’s big shareholders.
But ordinary investors who hold shares ‘electronically’ – in a nominee account operated by their broker or online platform, instead of on old-fashioned paper certificates – remain unhappy that this might have disenfranchised them if the vote had gone ahead.
Top stockbroker The Share Centre even lodged a protest with Business Secretary Greg Clark over the prospect that some shareholders could have been silenced.
The furore over Unilever and its eventual climbdown may deter other firms from falling into the same trap when they hold their own high profile votes.
In the meantime, we asked an expert from Equiniti, which provides share registration services to many listed companies including top players in the FTSE 100 and FTSE 250, to explain how shareholders can get a vote in future situations like this.
Equiniti is not the registrar for Unilever.
Mark Taylor: ‘Due to the disadvantages of paper certificates, the preferred method of holding shares these days is via a nominee’
Mark Taylor, chief customer officer at financial services firm Equiniti, replies: Firstly, it is useful to understand what it means when an investor says they hold shares ‘electronically’.
Most shares these days are held digitally in what is known as a nominee account.
Broadly, this means that the name of an individual does not appear on the share register of a company.
Instead the name of the nominee company, which is holding the shares, does.
It is the job of the nominee company, typically a stockbroker or online platform, to keep your shares safe and ensure that you receive the rights associated with your shareholding as if you were a shareholder appearing on a register.
The nominee company approach is quite common these days.
It is a more efficient way of holding shares and ensuring that trades can be settled, usually through a system known as CREST.
Why do many people hold shares digitally rather than on paper nowadays?
The alternative would be for a shareholder to hold paper certificates and have their name entered onto the company’s share register. This approach has a number of drawbacks.
Each time the individual sells stock in that company the appropriate level of share certificates needs to be submitted to cover the sale.
In addition, if the shareholder elects to re-invest dividends, then each time they will receive a share certificate. Some companies pay dividends quarterly, while others pay twice or only once a year.
Over time these share certificates build in number and sometimes shareholders lose them. They can be replaced, but at a cost, which depends on the value of the shares held.
Normally, there will be administration fee (the cost of recording the original lost certificate, the issuing of a letter of indemnity and the production of a new certificate) and a countersignature fee (the cost of the insurance to protect the issuer from a misuse of the original certificate).
For guidance, Equiniti’s administration fee is £42 including VAT for shares worth £100 or above, and nothing for those worth less.
Its countersignature fees vary from £23.32 for shares worth between £50 and £1,000, to £675.68 for shares worth between £75,000 and £100,000.
It costs nothing for shares worth less than £50.
For shares worth £100,000-plus the investor would need to contact Equiniti (or their appropriate registrar) as the cost would be subject to the value of the stock in excess of that.
The shareholder can source their own indemnity countersignature from any market provider.
Due to the disadvantages of paper certificates, the preferred method of holding shares these days is via a nominee.
You can exercise your rights to vote and attend AGMs either way, but because using a nominee means you are not named on the share register the process is different.
How do you vote if you hold shares electronically?
If a shareholder using a nominee contacts the nominee company then they should be able to vote and receive the annual report and accounts as well as attend an AGM.
However, the individual must make this request. It is not automatic.
Therefore, each time there is a vote the shareholder would need to make the request. It is a similar situation if they wish to attend an AGM. They need to make contact.
Some companies make a nominee account available for their individual shareholders. This is known as a Corporate Sponsored Nominee.
The CSN works by removing investors’ names from the main register and holding them together with other investors in the nominee company.
A separate register of underlying individual investors is maintained behind the scenes by the nominee.
Investors will still enjoy the benefits of owning shares, retain the right to receive dividend payments and the company will usually make available financial information and arrange for you to attend and vote on matters put to general meetings of the company.
Essentially, a CSN is deemed as an extension to a share register and therefore company communications are automatically sent to somebody that has stock held on their behalf by a CSN.
If the company you have a holding in has a CSN, there is a simple form to complete to sign up.
There is no charge to transfer shares into a CSN. Once in the CSN there are no ongoing management fees.
What happened in the Unilever case?
In the case of Unilever, many investors held their shares in nominee accounts, but the company stated that the large brokers would only count as a single shareholder vote, instead of counting the votes of every shareholder in the nominee account.
This is not something that happens regularly, and in case of similar votes in the future, investors looking to have their say should understand how their stock in a specific company is held, look out for communications from the company if they are held via a CSN and get in touch with their nominee company if they are held via a nominee account.