UKSA Deplores Move by Hunting Plc to Redeem Preference Shares Without a Vote of Preference Shareholders

Hunting Plc are proposing to redeem their 8.25% Cumulative Convertible Preference Shares of £1 at their par value. This is despite the fact that they recently traded as high as 119.50p and were trading at 111.50p immediately before the announcement. Even though the share certificates clearly indicate that the shares “will not be redeemable”, the company apparently considers that they can do this as a “return of capital” under the Articles, and without taking a separate vote of the Preference shareholders. 

In essence, the company is permitting only the Ordinary shareholders to vote on this matter, which is surely prejudicial as there is an effective transfer of value from the preference to the ordinary shareholders. The company argues that it is right to do this as the company can borrow money at a lower rate of interest in the market than it was paying on the preference shares, but UKSA would argue that all shareholders in the company should be consulted in these circumstances, not just those that are likely to benefit. 

UKSA Chairman David Blundell has recently said “The shares are held by a number of our members as they were a good source of income and have always been listed as “irredeemable” so we feel our members have been grossly misled in the past. We understand the desire of the company to get out of an onerous obligation, but this seems to be very inequitable. We encourage the preference shareholders to protest against this action of the company and we urge all Hunting shareholders to vote against this proposal”.

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Several UKSA members were affected by this proposal, including Robert Muriel who sent his objections to the Chairman of UKSA (to contact Robert Muriel, telephone 020-7828-1447). Several commentators have pointed out that the move to exclude preference shareholders from voting on this matter appeared to be legally, as well as morally, dubious. The Chairman of Hunting Plc is Mr R.H Hunting and their address is 3 Cockspur St, London SW1Y 5BQ if you wish to make representations on this subject.

Postscript: The vote of Ordinary shareholders took place at an EGM on the 30th June and the resolution to cancel the Preference shares was passed by a very large majority.

At the subsequent high court hearing on the 28th July, several people spoke against the proposal, including UKSA member Robert Muriel. After some hours of legal argument the judge hearing the matter decided to approve the arrangement. This was apparently on the basis that the Company's Articles should take precedence and that irrespective of what had been said by the company elsewhere (eg. on the share certificate), the shareholders should have checked the Articles when they acquired the shares.  Judges in such matters often appear unwilling to step outside the technical legal position and consider the wider public interest or moral merits of the situation.

Clearly any investor in the shares of Hunting Plc would need to consider very carefully as to whether they consider the company is being run on the highest principles and in the interests of all shareholders.