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Implementation of the Companies Act 2006: Centrica
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| (Wednesday, 28 November 2007) Written by Grant Dawson |
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Centrica plc
Energy and related services (UK, NA and Europe)
FTSE100 listed company (no.30)
Market Cap of Ł13.5bn
Ten person board (chairman, four executives and five independent non-executive directors)
900,000 shareholders:
80,000 held within the corporate nominee ‘FlexiShare’
Companies Act 2006
Electronic communications with shareholders
Directors’ duties
Articles of association
Conflicts of interest
Electronic Communications
Prior to new legislation:
gentle encouragement to take SFS or web-based information
welcome letter encouraged SFS
‘tired of all this paper’ campaign
Full annual report - 20,000 shareholders
Summary financial statement - 840,000
Web-based (with email alert) - 37,000
2006 annual report and SFS accompanied by letter from the Chairman explaining the benefits of web-based communications
Continued with ‘tired of all this paper’ campaign
Conducted election for paper/web-based communications
Enabling resolution passed at the AGM
Web-communication Benefits
Wealth of information on the web-site:
current share price
up to date news and information about the company’s activities
annual report and summary financial statements
financial results and trading updates
results presentations and webcasts
on-line corporate responsibility report
historic dividend and share price details
Electronic voting via Shareview with immediate confirmation of receipt
Shareholder Elections
Paper communications:
4,500 full annual report and accounts
70,000 summary financial statement
Web-based communications (active):
48,000 (an increase of 11,000)
Web-based communications (deemed):
770,000
Web-based Communications Deemed Consent
Those shareholders that did not respond to paper/e-comms election are deemed to have consented to web-based communications
Legal requirement to advise in writing the availability of shareholder information on website
ICSA best practice guidance - to send personal proxy card in the early years
Chairman’s caution - disenfranchisement of shareholders?
Web-based Communications Deemed Consent - Shareholders
Phased approach:
In 2008, we intend to issue a six page document to deemed consent shareholders:
Chairman’s letter
financial highlights (inc dividend)
list of proposed resolutions, time and venue of AGM (but not full notice)
information about how to access the website and the benefits of web-based communications
Proxy card
We will consider feedback from shareholders
We will analyse the proxy responses (any correlation between active elections for paper/e-comms and proxy returns?)
Mid/late 2008 - decision on whether we continue with phased approach for a further year or move to advisory letter only
Web-based Communications – The Future
Continue to promote the benefits of web-based communications
Investment in the website: new technology; updated design; improved content and dedication of internal resource to ensure it is managed and up to date
Overall, there are cost savings and significantly increased access to a wealth of information about the company in which our shareholders have chosen to invest
Engaged shareholders (direct and indirect)
Directors’ Duties
Programme of directors’ training on the new Act
Paper on directors’ duties and derivative actions taken to the September 07 board meeting, ahead of the October 08 implementation of first four duties
Directors’ conflicts being reviewed as part of development of new articles
Training on directors’ interests, conflicts and benefits to be given ahead of October 08 implementation
Directors’ Duties – Approach Taken
Briefings given to plc and subsidiary boards, senior executives and other managers responsible for preparing board papers and/or taking decisions
Part of new directors’ induction (and terms of appointment will make reference to duties)
Directors’ Duties - Impact
Guidance issued by GC100
Factors listed that directors should have regard to not exhaustive
Not planning on reciting them in board papers or minutes
Should consider all relevant factors when making decisions
No major impact on a well managed company
Articles of Association
Opportunity for wholesale review of articles e.g. are borrowing limits appropriate for the future needs of the business?
Objects clause deemed to form part of articles:
required?
or should you rely on unlimited objects?
Removal of matters covered by the Act (avoid duplication) e.g. form of shareholder resolutions, notice periods, variation of class rights, requirement to keep accounting records
Removal of articles relating to matters that now only need shareholder approval e.g. purchase of own shares, consolidation and subdivision of shares and reduction of capital
To bring into line with new provisions e.g. web-based communications, time limits for the appointment of proxies, the process for authorising directors’ conflicts of interest, authorisation for the directors to change the company name - contentious?
Process:
outline paper to the November board meeting
detailed proposals to the December board meeting
final draft of articles and notice of meeting to the February board meeting
final approval delegated to a committee
May AGM
new articles to be in force from 1 October 2008 - to coincide with final implementation of the Act
Conflicts of Interest
Articles may include provision enabling directors to authorise a conflict or possible conflict
Directors’ general duties not infringed by authorising in accordance with articles (S.180(4))
Major law firms liaising with ABI and institutional investors regarding governance around authorisation process
Conflicts of Interest - Governance
S.175(6) only non-conflicted directors to count towards quorum and vote on conflict in question
Notwithstanding S.180(4) directors to act in way that promotes the company’s success
Limits or conditions to be attached to authorisation, e.g. availability of board papers and attendance at meetings
Development of best practice
Board’s annual review of conflicts over which current authorisation in place
Disclosure of authorisation and review processes in the governance report
ABI currently developing principles in respect of conflicts to be followed by boards - publication date not yet known
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