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A Victory for the Little Man (and Woman)
Today’s announcement that takeovers by schemes of arrangement are to be subject to tax is a victory (albeit a small one) for private investors. See page 61, paragraph 1.249, of the full Autumn Statement for which a link appears below. The UK Shareholders’ Association (UKSA) welcomes the news, because we believe it will result in fewer takeovers by this method.
Such takeovers deprive investors holding shares in nominee accounts of any say in the decision. This is because these takeovers are decided by vote and private investors in nominee accounts do not have the right to vote, even though the future of their investments is at stake. UKSA has long seen this as scandalous, not least because investors face so much pressure to use nominee accounts.
A takeover by scheme of arrangement gives an acquirer 100 per cent of the shares regardless of how many shares have been voted. The High Court gives no protection to those excluded from the vote because it is bound by precedent to ignore the degree of participation. The Takeover Panel gives no protection either, despite its “central objective (being) to ensure fair treatment for all”, because it ignores those who are not on the share register.
Would-be acquirers love the arrangement, because they buy companies cheaply – now slightly less cheaply than before but still not equitable. Such takeovers will not be equitable until all nominee account users are fully enfranchised.