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Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

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Dod101
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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166643

Postby Dod101 » September 16th, 2018, 8:12 am

On the subject of with holding tax, Unilever tells us in Part V of the documentation that they have a scheme in place whilst the Dutch Withholding Tax (DWT) applies to pay ex PLC holders from repayments of nominal share capital instead of from Revenue and thus they will not be 'real' dividends, although it will be all the same to us (money is fungible and all that). That will I assume get round the DWT. No doubt they will have taken advice on this.

However, if DWT is not abolished they will eventually run out of this option, what they call headroom, and then on page 60, say 'the availability of such structures or measures cannot be guaranteed'. Before that they say that they would look at alternative structures so as to pay dividends free of the DWT. That is one explicit risk, and that coupled with all the other factors that I and ayshfm1 mentions should make any PLC holder think carefully and then vote against the proposals. Apart from simplification as they call it there is simply no upside for PLC holders. I bet there will be no tangible savings in costs as a result of it.

I have emailed the Leverhulme Trust to urge them to make their position known.

Dod

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166661

Postby OZYU » September 16th, 2018, 9:43 am

Dod101 wrote:On the subject of with holding tax, Unilever tells us in Part V of the documentation that they have a scheme in place whilst the Dutch Withholding Tax (DWT) applies to pay ex PLC holders from repayments of nominal share capital instead of from Revenue and thus they will not be 'real' dividends, although it will be all the same to us (money is fungible and all that). That will I assume get round the DWT. No doubt they will have taken advice on this.

However, if DWT is not abolished they will eventually run out of this option, what they call headroom, and then on page 60, say 'the availability of such structures or measures cannot be guaranteed'. Before that they say that they would look at alternative structures so as to pay dividends free of the DWT. That is one explicit risk, and that coupled with all the other factors that I and ayshfm1 mentions should make any PLC holder think carefully and then vote against the proposals. Apart from simplification as they call it there is simply no upside for PLC holders. I bet there will be no tangible savings in costs as a result of it.

I have emailed the Leverhulme Trust to urge them to make their position known.

Dod



It is indeed the big boys who will determine all this, even many thousands of us private investors won't shift that vote.


I have for example estimated(back of envelope type stuff) what Nick Train and his chums hold in ULVR between their various funds and ITs vs what we ourselves can vote (we have 1420 votable, another 247 in nominee probably not votable, and probably another 200's worth indirectly held) . We will vote against, but in reality piddling in the sea stuff. ULVR is therefore just over 2% of our overall markets holdings.


We won't, however, vote against because of the 'Dutch takeover' dimension, because there imho would be hypocrisy in that, after all I did not hear much lamenting from UK investors when AZN was created and UK PLC was taking over another country's silver, and in any case these very large outfits are supra national and Country boundaries often mean little to them. BP, a great UK investors favourite, does much business with Russia...without caring much on the political landscape...etc..

We will vote against because there are dangers and potential unnecessary complications on the tax position which another method/approach could have solved.


Ozyu

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166665

Postby Dod101 » September 16th, 2018, 9:59 am

Yes but this is not a takeover in the sense of say AstraZeneca. The two are not comparable. I would hope though that if enough of us small shareholders vote against it and a number of big institutional ones do we might get somewhere. We'll see.

Dod

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166830

Postby Raptor » September 17th, 2018, 8:45 am

Another Major Shareholder casts doubts on the move. Aviva

Raptor. Not a holder (thankfully) ;)

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166840

Postby Dod101 » September 17th, 2018, 9:31 am

Not sure why Raptor says is he is glad not to own Unilever. It is certainly one of the better shares around and I do not think that the move to Holland if it goes ahead will change that but for all those doom mongers, it seems that not all institutional investors will follow the recommendation of the Directors so we smaller shareholders should vote, hopefully to reject the proposals for the reasons given.

Obviously the institutions will sway the vote but if these (anti) votes are backed by a raft of small shareholders as well that may concentrate their minds. It is I think the PLC shareholders who will lose out and as it happens they have the best chance of derailing the proposals as the bar is higher in the UK than in Holland.

I am about to write to Unilever and will propose the Royal Dutch Shell solution where they respected the dual nationality by incorporating in the UK and managing the business from Rotterdam. That I could accept and of course the A and B shares which Shell has gets around any question of the Dutch withholding tax on Sterling dividends.

Dod

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166841

Postby idpickering » September 17th, 2018, 9:43 am

Dod101 wrote:
I am about to write to Unilever and will propose the Royal Dutch Shell solution where they respected the dual nationality by incorporating in the UK and managing the business from Rotterdam. That I could accept and of course the A and B shares which Shell has gets around any question of the Dutch withholding tax on Sterling dividends.

Dod


Interesting Dod, and I for one would very much like to hear about any reply you may get in return. I like your idea too.

Ian.

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166849

Postby Wizard » September 17th, 2018, 9:55 am

I can't believe they will not have considered the Shell model. What would be interesting is if they are willing to give any information on why they rejected it, i.e is it publicly defendable or for some aspect of management utility? If they were to lose the vote I wonder if any of the board would feel they had to resign. This must have taken up a fair bit of senior management time and if it is rejected the fall out will no doubt take up even more time.

Management can no doubt see this offers no upside to UK shareholders, so why go ahead and propose something that may have adverse consequences for UK holders? Does this raise any concerns about the future conduct / culture of Unilever I wonder?

Terry
(No holding)

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166884

Postby ayshfm1 » September 17th, 2018, 11:05 am

It's an interesting point. Not sure why they chose not to implement the Shell model, however both Shell and Unilever quietly "persuaded" Mark Rutte (who has a terrible memory apparently) to drop the 15% with holding tax, provided it goes through doesn't get revoked (add lots of political risk) it means that two types of shares are not needed since RDS.B existed only to avoid it. The small nuance Unilever missed (or didn't care about) was it also allows inclusion into FTS100.

On a related note, assuming this goes through (the withholding tax law) then sometime in 2019 it won't matter if you hold RDS.A or B from a dividend tax perspective. Given Shell's role in strong arming Rutte (apparently he was intially against but was the two companies were able to change his mind) then it's probably on the cards that shell RBS.B will be transformed.

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166895

Postby Gengulphus » September 17th, 2018, 11:44 am

idpickering wrote:
ayshfm1 wrote:As always wise words from big G above.

Is that Gengulphus’s new handle? ...

If you mean am I going to adopt it, the answer is "No"; if you mean are others going to adopt it, that's not up to me! I don't recommend using it, though, because there are (currently) 168 other users of the site whose usernames start with 'G', and I've certainly been known to get into discussions with some of them...

Gengulphus

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166900

Postby Gengulphus » September 17th, 2018, 12:22 pm

ayshfm1 wrote:HFX will provide me a letter if I want to go in person - I don't. Or they will vote on my behalf provided I confirm the resolution I want them to vote against which I will. You can do it via the chat function.

There are two votes, one for each meeting. On the proxy voting forms, they appear as:

For the Extraordinary General Meeting

"SPECIAL RESOLUTION

The Special Resolution is to approve: (i) all such steps as are necessary to be taken for the purpose of effecting the simplification of the Unilever Group's dual-parent structure under a single holding company; and (ii) the amendments to the Company's articles of association. The Special Resolution is set out in full in the notice of Extraordinary General Meeting contained in Part X of the Scheme Circular."

followed by "For the Special Resolution", "Against the Special Resolution" and "Vote Withheld" voting boxes. By the way, the Special Resolution takes up most of pages 93-97 of the Scheme Circular, so it's easy to see why it's not given in full on the proxy voting form!

For the Court Meeting

This is a vote for or against the whole Scheme and is for The High Court of Justice in England and Wales, rather than on a shareholder's resolution for the company. There is no real description of the Scheme on the proxy voting form other than saying it is "referred to in the notice convening the Court Meeting contained in Part IX of the Scheme Circular". That in turn says that the Scheme is "incorporated in the document of which this Notice forms part" and it's then pretty easy to identify it as Part VI of the Scheme Circular (which takes up pages 71-75, so again it's pretty easy to see why it's not given in full on the proxy voting form.

There are "For the Scheme" and "Against the Scheme" voting boxes.

You'll presumably want to vote in both.

Gengulphus

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166904

Postby Dod101 » September 17th, 2018, 12:41 pm

Indeed we need to vote at both meetings, to respond to Gengulphus.

The simple answer to the other question about why they are not more respectful to the PLC shareholders is I think no more complicated or devious than that as both the Chairman and CEO are Dutch they see no need to worry about that and they keep trumpeting about NV being 22% bigger than PLC anyway. Naturally at the moment there are two AGMs, one in London for PLC and the other in Rotterdam for NV. They share exactly the same directors but two years ago when I attended the London AGM of PLC, only abut half of the Directors bothered to turn up and there were a lot of complaints about that. I think, led by the Chairman and the CEO, they tend to see the London end as the small brother, and the main agenda being set by Rotterdam. As the bar is much higher in London to get this through, they may learn a lesson.

I do not think there is much wrong with the culture but to have both the Chairman and the CEO Dutch is not helpful for an international outlook in governance matters as well as business.

Dod

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166913

Postby Raptor » September 17th, 2018, 12:58 pm

Dod101 wrote:Not sure why Raptor says is he is glad not to own Unilever.
Dod


I meant in that I do not have to worry about the Corporate Structure and which way to vote. Never held because there was always something better to buy.

Raptor.

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166925

Postby Gengulphus » September 17th, 2018, 1:18 pm

OZYU wrote:It is indeed the big boys who will determine all this, even many thousands of us private investors won't shift that vote.

Almost certainly true for the Extraordinary General Meeting - many thousands of us private investors will only shift that vote if the votes of the 'big boys' turn out to be fairly close to the 75% majority of shares needed to pass the Special Resolution.

But not true of the Court Meeting, because as I said earlier in the thread, the Court Meeting requires (with my bold this time):

"the approval of the UK Scheme by a majority in number of PLC Shareholders, present and voting, whether in person or by proxy, at the PLC Court Meeting or any adjournment thereof, representing not less than 75 per cent. in value of the PLC Shares (including PLC Shares represented by PLC ADSs) that are subject to the UK Scheme voted by such shareholders"

It would take e.g. ten thousand private investors holding an average of a hundred shares each to balance out the votes of just one 'big boy' holding three million shares on the 75% of shares requirement for the Special Resolution at the Extraordinary General Meeting and the "75 per cent. in value of the PLC Shares" part of the passing requirement for the Scheme at the Court Meeting. But it takes just one private investor to balance out the vote of a 'big boy' on the "majority in number of PLC Shareholders" part, no matter how many or few shares each controls, and the vote needs to satisfy both parts if the Scheme is to pass.

Because of this, voting in Court Meetings on the rare occasions that they happen if basically the best chance that private investors get to influence the direction their companies take.

Gengulphus

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166928

Postby idpickering » September 17th, 2018, 1:28 pm

Gengulphus wrote:
idpickering wrote:
ayshfm1 wrote:As always wise words from big G above.

Is that Gengulphus’s new handle? ...

If you mean am I going to adopt it, the answer is "No"; if you mean are others going to adopt it, that's not up to me! I don't recommend using it, though, because there are (currently) 168 other users of the site whose usernames start with 'G', and I've certainly been known to get into discussions with some of them...

Gengulphus


Hello Gengulphus. I never for a moment thought that you would adopt that name. I was just getting into the light humour that’s all. With all the serious talk around here it was a welcome change.

Ian.

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166931

Postby Gengulphus » September 17th, 2018, 1:42 pm

ayshfm1 wrote:It's an interesting point. Not sure why they chose not to implement the Shell model, however both Shell and Unilever quietly "persuaded" Mark Rutte (who has a terrible memory apparently) to drop the 15% with holding tax, provided it goes through doesn't get revoked (add lots of political risk) it means that two types of shares are not needed since RDS.B existed only to avoid it. The small nuance Unilever missed (or didn't care about) was it also allows inclusion into FTS100.

I strongly suspect that Royal Dutch Shell's solution involving the RDSA and RDSB classes of share required the agreement of not just the previous UK company's shareholders and the previous Dutch company's shareholders, but also the agreement of the Dutch government of the time. That's because I cannot see how a company can be tax-resident in the Netherlands (as Royal Dutch Shell is) and yet pay part of its dividends under the UK tax regime, not the Dutch, without the agreement of the Dutch government.

So unless the Dutch government is willing to agree to another such arrangement, I strongly suspect that Unilever simply won't have had the option of implementing the 'Shell model'. At least one major circumstance has changed since 2005 that may have led the Dutch government to be more reluctant to agree to such arrangements, and even if it hadn't, I'd be pretty certain that the Dutch government has changed since then!

Gengulphus

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166959

Postby Dod101 » September 17th, 2018, 3:15 pm

Gengulphus wrote:[ That's because I cannot see how a company can be tax-resident in the Netherlands (as Royal Dutch Shell is) and yet pay part of its dividends under the UK tax regime, not the Dutch, without the agreement of the Dutch government.

So unless the Dutch government is willing to agree to another such arrangement, I strongly suspect that Unilever simply won't have had the option of implementing the 'Shell model'. At least one major circumstance has changed since 2005 that may have led the Dutch government to be more reluctant to agree to such arrangements, and even if it hadn't, I'd be pretty certain that the Dutch government has changed since then!


Is Royal Dutch Shell tax-resident in the Netherlands? I do not understand corporation tax law because I have never needed to but that seems very strange. That notwithstanding I would assume that the Dutch Government must have agreed to the at least as convoluted proposals by Unilever to pay 'dividends to ex PLC shareholders out of the reduced nominal capital per share', which is what they are proposing at least until the Dutch withholding tax is removed, if it is. If that is the case, then I cannot see a problem with the artifice of A and B shares per Royal Dutch Shell, which is of course incorporated in London, if that makes any difference.

Anyway Unilever has not told us if they considered the Shell model and if so why they rejected it.

Dod

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166986

Postby Arborbridge » September 17th, 2018, 5:37 pm

absolutezero wrote:I ignore all Brexit related commentary these days. It's all turned rather hysterical.

There's nothing hysterical about companies making sensible arrangements to cover themselves for Brexit, and many are doing so. These are sober businesses taking steps to mitigate risks,not political scribblers.

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#167005

Postby Dod101 » September 17th, 2018, 7:41 pm

I do not think Brexit has much to do with these proposals. I think it is the Heinz Kraft bid and the fact that were shown to be vulnerable. Hence the share buybacks, the increased dividend and now the attempt to retreat to the Netherlands where they appear to have more protection.

Anyway, I have now emailed the Chairman and the Leverhulme Trust. If I get any response I will be happy to report.

Dod

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#167006

Postby absolutezero » September 17th, 2018, 7:41 pm

Arborbridge wrote:
absolutezero wrote:I ignore all Brexit related commentary these days. It's all turned rather hysterical.

There's nothing hysterical about companies making sensible arrangements to cover themselves for Brexit, and many are doing so. These are sober businesses taking steps to mitigate risks,not political scribblers.

Despite the Unilever board making very clear statements saying Brexit isn't a factor.
Sigh
:roll:

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#167066

Postby Gengulphus » September 18th, 2018, 12:46 am

Dod101 wrote:
Gengulphus wrote:[ That's because I cannot see how a company can be tax-resident in the Netherlands (as Royal Dutch Shell is) and yet pay part of its dividends under the UK tax regime, not the Dutch, without the agreement of the Dutch government.

So unless the Dutch government is willing to agree to another such arrangement, I strongly suspect that Unilever simply won't have had the option of implementing the 'Shell model'. At least one major circumstance has changed since 2005 that may have led the Dutch government to be more reluctant to agree to such arrangements, and even if it hadn't, I'd be pretty certain that the Dutch government has changed since then!

Is Royal Dutch Shell tax-resident in the Netherlands? I do not understand corporation tax law because I have never needed to but that seems very strange. ...

Yes, it is. I don't understand corporation tax law either, especially where interactions between different countries' versions of corporation tax law are concerned. But I do know how to search an annual report for key words and phrases! And Royal Dutch Shell's 2017 annual report contains a very clear statement "The Company is tax-resident in the Netherlands.", which is under the heading "TAXATION" in note 2 to the parent company financial statements on page 202. And it's frankly unbelievable that they lack sufficient knowledge of corporation tax law to get that right!

I'll add that a search of the report for the phrase "dividend access mechanism" makes it very clear that it's a rather intricate device used to pay dividends on RDSB shares in a way that makes them have a "UK source for UK and Dutch tax purposes". I can't say I understand how it does so, but enough words are spent on it to make it clear that it's such a device! And it is specifically stated to be the subject of an agreement between the company and the Dutch taxman/government:

"The Dutch tax treatment of dividends paid under the dividend access mechanism has been confirmed by the Dutch Revenue Service in an agreement (“vaststellingsovereenkomst”) with the Company and N.V. Koninklijke Nederlandsche Petroleum Maatschappij (Royal Dutch Petroleum Company) dated October 26, 2004, as supplemented and amended by an agreement between the same parties dated April 25, 2005, and a final settlement agreement in connection with the Acquisition dated November 9, 2015. The agreements state, among other things, that dividend distributions on the dividend access shares by Shell Transport and/or BG will not be subject to Dutch withholding tax provided that the dividend access mechanism is structured and operated substantially as set out above."

Dod101 wrote:Anyway Unilever has not told us if they considered the Shell model and if so why they rejected it.

Of course they considered the Shell model. This scheme has clearly had a great number of expert advisers working on it, and it's not remotely believable that they weren't aware of how Shell did it and considered doing it the same way.

I agree that we don't know why they rejected the Shell model. But I was responding to ayshfm1's "Not sure why they chose not to implement the Shell model" comment, which implicitly assumes that they had a choice about whether to implement the Shell model - and the point of my comment was that they might very well not have had such a choice.

Gengulphus


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