FSA’s revised rules should deter companies from running roughshod over UK corporate governance practice

The problems of Bumi, the mining company mired in an investigation into alleged irregularities in its Indonesian operation, are well rehearsed. The London-listed company started life as a shell company – one hunting acquisitions – known as Vallar and fronted by financier Nat Rothschild. It took a stake in the Jakarta-based company Bumi Resources and renamed itself Bumi, but the London-listed business is now left with a dominant shareholder with a near 30% stake.

The on-going saga – the share price is down 84% from the £10 flotation price – has led to questions about why companies such as Bumi are able to gain a listing in London at all.

New rules published the Financial Services Authority on Tuesday should in theory deter any company from running roughshod over the accepted corporate governance rules and boardroom structures.

The FSA – which oversees the “listing rules” with which London listed companies much comply – is now introducing the concept of a controlling shareholder. This will require an agreement to be put in place that formalises the relationship between the dominant shareholder and the company. Perhaps more crucially, the company will have to have a majority of independent directors and also introduce a dual voting structure, so that independent shareholders can have more say in the directors’ appointment.

It sounds complicated but should at least tackle some of the problems of investing in companies with large shareholders. Luis Martin, lawyer at Eversheds, pointed out that some of these protections were removed in the 2004 review of the listing rules. They are now being reintroducted – and has extra provisions. Another fall out, it seems, from the days of “light touch” regulation.