A bid to require listed companies to identify the beneficial owners of shares held by nominees and accord them certain rights will cause major problems, company lawyers have warned.

Clause 138 of the Company Law Reform Bill was amended against the government's wishes in the House of Lords. Conservative shadow trade minister Lord Hodgson said it aimed to give members whose shares are held in nominee accounts the right to receive information - such as accounts and notices of meetings - and the ability to exercise their right to vote on the shares they own.


The original, more detailed version gave companies the option of allowing members to nominate others to enjoy certain rights.


The Bill reaches the House of Commons this week, where solicitors, registrars and many big companies hope the clause will be further amended because of the possible practical consequences.


A briefing from the Law Society's company law committee said the amendment, while laudable, endangered the accurate record of the persons entitled to rights of membership. It claimed that the clause, as drafted, opens the door to confusion about whether the members or beneficial owners are entitled to voting rights, and could lead to multiple votes being cast in respect of the same share.


Other problems included the potential for an activist to buy a single share and then nominate thousands of people to receive information, and the extra administrative costs faced by companies.


Committee member Helen Shilling said that, while the original clause struck a sensible balance between the interests of the company and of beneficial owners, the new version was 'absolutely unworkable'. Though it was a permissive right as first drafted, 'what normally happens is that the largest companies want to be seen to do the right thing and lead the way', she explained, adding that some already have.


The government has indicated that it will try to overturn the amendment in the Commons.