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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.
For the past 3 years, The UK Shareholders’ Association has played a leading role in advising the Government, the Financial Reporting Council, the Financial Conduct Authority and other bodies on issues arising from the growth of pooled nominee accounts, in which close to a majority of private investors now find themselves.
We have relentlessly been drawing attention to the absence of shareholder rights and protections for nominee account users and their inability to play a full part in the stewardship of UK companies. The savings of countless ordinary individuals are at stake, invested in equities yet they are denied the rights of ownership. This is wrong.
We think this situation is scandalous, not least because it appears to be, in the developed world, a uniquely British problem. The time has come to demand changes to remedy these matters. Today we launch THE RUNNYMEDE DECLARATION FOR SHAREHOLDER RIGHTS. and invite those who share our concerns to give it their full support.
In not many months’ time, there will be a new government. It will have many matters to address, but, in the spirit of Magna Carta, we will press those who seek election to Parliament and those who enter that government, to place the remedies we are seeking high on their list of priorities. The millions who save and invest deserve no less.
The UK Shareholders' Association (UKSA) is the leading independent organisation representing the interests of private shareholders in the United Kingdom. We: