|Companies should allow corporations which provide nominee or custodial services to appoint more than two proxies so that shareholders who hold shares through such corporations can attend and participate in general meetings as proxies.|
This Guideline sets out the need for the appointment, at general meetings, of adequate proxies by third-party companies that provide nominee and custodial services.
Not all shareholders hold shares in their own names. Many, both individuals and institutions, maintain their shares with third-party nominee and custodial services which hold those shares on their behalf.
Investors may prefer to use nominee or custodial services because they do not need their own membership of the securities depository. This makes it convenient and less costly for them to trade in shares, especially in multiple stock markets.
The disadvantage of using a nominee is that, from the company’s standpoint, it is the nominee who is the official shareholder, i.e., the one that receives all the company information meant for shareholders, and the one with the ownership rights to attend and vote at AGMs.
However, investors would not directly lose out financially by holding their securities through a nominee or custodial services. These arrangements would usually ensure that the dividends, rights and bonus issues are effectively received or exercised by the investor as the beneficial owner, and that key information and resolutions of general meetings are communicated to them.
Investors would generally also have the option to direct the nominee or custodial service on how it should vote on the resolutions, or even to attend as the proxies of the nominee at the general meeting.
However, a practical difficulty is that, until recently, unless the articles of a company provide otherwise, a member could appoint only up to two proxies, and a proxy could only vote by poll. This makes it difficult, if not impossible, for a nominee or custodial service to meet the voting or attendance requirements of its many clients who all may have had different directives on the voting, or desired to physically attend the meetings.
This is why this Guideline urges companies to allow nominee and custodial service providers to have more than two proxies so that investors with beneficial interests can also attend and participate in general meetings as proxies.
The Companies Act has a multiple proxies regime (which was introduced via the Companies (Amendment) Act 2014) in which specified intermediaries (such as banks and capital market services licence holders that provide nominee or custodial services), are allowed to appoint more than two proxies to attend shareholders’ meetings. This means that the company no longer has the option of capping at two for the number of proxies for nominee or custodial services.
In addition, indirect investors (including CPF members who have invested in the shares of companies through CPF Agent Banks or the CPF Board) can also be appointed as proxies to participate in and vote at shareholders’ meetings. The rationale is that such participation is important for a healthy, well-functioning capital market.
B. SGX Disclosure Guide
C. Related Rules and Regulations
- Section 181(1C) of the Companies Act: Proxies.
D. CG Guides
- Board Guide 7.2: Shareholders [Stakeholder Engagement].
- Board Guide 7.3: Shareholder Advisors [Stakeholder Engagement].
- Board Guide Appendix 7B-2: Proxy Advisors and the Board [Stakeholder Engagement].
- Board Guide Appendix 7F: General Meetings of Shareholders [Stakeholder Engagement].
- Board Guide Appendix 7G: Shareholder Advisors’ Advisories [Stakeholder Engagement].
E. Related Articles
- “CA amendments: Less regulatory burden, more flexibility” by Marcus Chow. (47KB)
- “Proxy access: When shareholders nominate directors” by Adrian Chan. (47KB)
- “Shareholder activism and how directors can respond” by Jerry Koh. (97KB)
- “Shareholder activism - Shareholder rights and its effectiveness” by Kala Anandarajah. (95KB)