Biggart Baillie Solicitors

Communicating with Shareholders - Welcome to the 21st Century

Thursday, January 17, 2008

by Catherine Feechan

Would your company like to communicate with its shareholders more quickly, more economically and in a more environmentally friendly way? Previously the law required communications with shareholders to be in hard copy but the Companies Act 2006 has introduced a new, more flexible regime which could greatly benefit many companies. So, how do you take advantage of the new rules?

1.         Company Communications with Shareholders

Step 1: Write to each of your shareholders asking them if they agree to receive electronic communications from the Company and if they agree to communication via the Company’s website.

Step 2: Where a shareholder responds with an email address, the Company can email them using that address in the future.  If they have also agreed to website communication the Company has the additional option of sending an email notifying the shareholder that documents, for example the Company accounts, have been posted on the website.                

Where no response is received from a shareholder clearly electronic communication is not possible.  It is however possible to use the website method.  This requires the Company to write to the shareholder to tell them that documents have been posted on the website.                

Any shareholder can at any time request hard copies of specific documents or that all communications be in hard copy form.

Step 3: Prepare a list of shareholders showing details of how to communicate with them and maintain that list.

2.         Stockholder Communications with the Company

If a company wants shareholders to communicate with it electronically it must clearly state an email address on the communication and should have an internal process in place to ensure that email address is properly maintained and monitored. If the Company is going to accept documentation in an electronic form that would previously require to have been signed by the shareholder, such as proxy forms or written resolutions, then thought needs to be given as to what, if any, additional evidence will be required that the person contacting the company is in fact the shareholder.  Smaller companies may have no additional checks, larger ones often provide shareholders with PIN numbers or other unique identifiers.

Companies of all sizes can benefit from the speed and convenience of communicating with shareholders electronically and in the 21^st century with so much business being conducted online, there’s no need for shareholder communication to be left behind – go “electronic”!

If you have any questions on how your company can “go electronic”, please contact Catherine Feechan at cfeechan@biggartbaillie.co.uk or call on 0141 228 8000.