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Particular problems may arise where companies are dominated by large shareholders. It is of course possible for a company to be publicly listed, and yet owned more than 50% by one individual (clearly in that case the directors are very much beholden to that individual and can be replaced at their whim, so other shareholders will effectively have little influence on what the company does and the way it is run).

However, with many shareholders inactive, and institutional shareholders often slow or reluctant to exercise their rights, a shareholding as low as 30% can often maintain effective control.

This can often occur when a long-established company is dominated by the family of the founder, even though it may not be obvious. With several family members of different names, supported by anonymous family trusts, and strong board representation, it can be run as if it was a family business, rather than a public company.

Other situations where this applies, often in new businesses, is where the founder and other senior executives have major shareholdings. The "insiders" may take a different view of the financial priorities of the business (for example in dividend policy) than that of ordinary shareholders.

A particular problem that can arise is where undisclosed "concert parties" are present. Concert parties are where groups of large shareholders act together for a common purpose (for example in a takeover bid), and such concert parties should be disclosed to the regulatory authorities. But enforcing such disclosure or demonstrating that shareholders are acting together to prejudice other minorities can be exceedingly difficult.

Dominant groups of shareholders often have representation on the board, thus exercising even more direct control of the company. Although directors should only act in the interests of the company, interpretation and enforcement of that role is not easy. They may well act more in the interests of ordinary shareholders rather than those of company creditors or other classes of shareholders such as preference holders.

UKSA would like to see more regulation of these matters, and more rights for minority shareholders in public companies.

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