Holding companies to account on matters like environment and social impact could become “virtually impossible” for many shareholders under new proposals, activists have warned.

The Treasury’s Digitisation Taskforce (DT), which is exploring ways to get rid of paper in the UK shareholdings system, has proposed that all retail investors be required to hold shares via an intermediary platform – like Interactive Investor or Hargreaves Lansdown.

The move comes as small investors who buy shares directly from a company, known as certified shareholders, still receive paper certificates.

But several investor groups said the proposals could harm shareholder rights and make it harder for activists to put pressure on boards.

Currently, certified shareholders can freely take corporate action like attend annual general meetings and file a resolution.

But investors who use nominee accounts via a platform do not own the shares in their own name, and therefore must go through the platform if they wish to take such action.

For certified shareholders, it's not the paper share certificates which are critical, or the actual shareholding, it's the ability to exercise shareholder rights

ShareAction said their supporters who use platforms have experienced major barriers when it comes to exercising the rights enjoyed by certified shareholders.

These include delays in correspondence, having to pay extra to take action like vote in the AGM, and a lack of relevant shareholder services.

Simon Rawson, deputy chief executive of ShareAction, said: “Where our real concern comes in is that our experience of trying to exercise shareholder rights via a nominee is really difficult.”

“It sounds easy, but it’s extremely painful to get these companies to do it.”

He said that when it comes to activism, filing a shareholder proposal or getting access to an AGM via a nominee is “virtually impossible”.

“For certified shareholders, it’s not the paper share certificates which are critical, or the actual shareholding, it’s the ability to exercise shareholder rights,” he added.

“We very much enjoy going to AGMs and asking questions, because we think it’s really important to hold company boards to account for their company’s impacts on the planet and its people.

“I’m concerned that this specific proposal, this way of implementing digitisation could be a barrier to that.”

If they enact (the proposals), they will make shareholder activism practically impossible and it will certainly reduce the amount of shareholder activism by 90% if not more

Mr Rawson said ShareAction is “not against digitisation” but called for a different option to get rid of the paper certificates, which would be to simply stop sending them to shareholders since digital records also exist.

ShareSoc and the UK Shareholder Association have also issued a joint response to the proposals, in which they warned of concern over access to information.

They said the proposals potentially limit the ability of shareholders to communicate, gather support and campaign on issues where they feel the board is not acting in their interest.

This is because they will no longer be able to get hold of other shareholders’ email addresses to communicate since beneficial owners’ details are not listed on shareholder registers, unlike certified shareholders.

Cliff Weight, member and former director of ShareSoc, said: “If they enact (the proposals), they will make shareholder activism practically impossible and it will certainly reduce the amount of shareholder activism by 90% if not more.”

Mr Weight also claimed that the nominee platforms cannot be relied upon to ensure shareholder rights are upheld in practice.

“It is very clear that we want shareholders to be able to give their views and hold companies to account,” he said.

“The whole climate change, the fat cat pay, equal pay and diversity issues – they’re being raised by shareholders, mostly by individual shareholders, and there’s a group of certain companies who would like to sweep these issues under the carpet and ignore them.

The rise of online investment platforms has been a huge positive, making investing cheaper and easier, but it also means that UK PLC has lost a direct connection with its shareholders

“But you need activist shareholders to make sure this doesn’t happen.”

Elsewhere, Marks & Spencer and Interactive Investor are leading a campaign to give nominee investors better links with the companies, including easier access to AGMs.

Jemma Jackson, head of PR at Interactive Investor, said the firm’s voting and information services are multi-award winning but added that “progress made by a few is not necessarily replicated more widely”.

She said: “The rise of online investment platforms has been a huge positive, making investing cheaper and easier, but it also means that UK PLC has lost a direct connection with its shareholders.

“We have called for beneficial owners to be better able to exercise their shareholder rights, and for companies to be better able to identify and communicate with shareholders easier and more cheaply.”

Ms Jackson said that Interactive Investor fully supports the taskforce’s recommendations.

But she added that it “should recognise that investment platforms are on different stages of their journey when it comes to facilitating shareholder rights”.

A Treasury spokesman said: “The independent Digitisation Taskforce is looking at ways to make shareholding easier and fit for the 21st century, and is due to deliver its final report next year.

“No decisions have been made on how exactly we do this, but HMT have been clear that any actions taken should not diminish the rights of current holders of paper certificates.”

A Hargreaves Lansdown spokesman said: “Nominee platforms such as HL’s significantly improves the investor experience and reduces cost whilst providing both online and app trading, real time valuations, access to over 10,000 different holdings and easy administration of corporate actions including voting.

“We encourage investors to engage with their investments and offer a digital voting service which is easy to use and completely free and we do not charge inactivity fees, exit penalties, for withdrawals or for other corporate actions.”