Preference shares -- keeping it simple

[Alaric]

I'm happy that substituting the word "repay" or similar makes enough sense to move on from language and debate the statement. Do you agree to the change?

The term "redeem" was being used in the sense of "repay at par". That's what Aviva wanted to do and what the legal loopholes appear to allow, provided you set aside EU Law.

The term "irredeemable" is used internationally, so definitions should not rely on the UK Companies Act.

[stockton]

There is no such thing as "redemption in a reduction of capital". According to UK Company law:

1. EVERY and ANY share class may be repaid in a reduction of capital subject to restrictions in their Articles and the law.
2. ONLY redeemable shares may be repaid by redemption. The fact they are redeemable is clear at their issue.

We cannot use "redeem" in its folksy meaning and expect to have any sensible discussion about the law. Redeem means what happens to redeemable shares.GS

Or alternatively:
The prospectus for any share issue is an fundamental document as enshrined in the Companies acts, and for irredeemable shares, “irredeemable” is clearly an important property given that it appears in both the share title and the body of the prospectus.
Although the meaning of the word redemption, per se, may be disputed there is no doubt that irredeemable has to do with the exchange of shares and from its philological origins has negative connotations about being able to carry out a procedure.
If we look at the Companies acts for any relevant procedures there are only 3 chapters that could possibly be considered; those on redemption, return of capital, and purchase of own shares.
The chapter on redemption cannot be relevant because it refers specifically to redeemable shares only.
If the term referred to the open market purchase chapter it would be superflous for such purchases ignore the characteristics of the subject shares.
That leaves only the chapter on return of capital, and, as seems quite reasonable, “irredeemable” must refer to that chapter.
Either “irredeemable” prohibits a return of capital, or lawyers have been writing nonsense into prospectuses for decades.

[GoSeigen]

There is no such thing as "redemption in a reduction of capital". According to UK Company law:

1. EVERY and ANY share class may be repaid in a reduction of capital subject to restrictions in their Articles and the law.
2. ONLY redeemable shares may be repaid by redemption. The fact they are redeemable is clear at their issue.

We cannot use "redeem" in its folksy meaning and expect to have any sensible discussion about the law. Redeem means what happens to redeemable shares.GS

Or alternatively:
The prospectus for any share issue is an fundamental document as enshrined in the Companies acts, and for irredeemable shares, “irredeemable” is clearly an important property given that it appears in both the share title and the body of the prospectus.
Although the meaning of the word redemption, per se, may be disputed there is no doubt that irredeemable has to do with the exchange of shares and from its philological origins has negative connotations about being able to carry out a procedure.
If we look at the Companies acts for any relevant procedures there are only 3 chapters that could possibly be considered; those on redemption, return of capital, and purchase of own shares.
The chapter on redemption cannot be relevant because it refers specifically to redeemable shares only.
If the term referred to the open market purchase chapter it would be superflous for such purchases ignore the characteristics of the subject shares.
That leaves only the chapter on return of capital, and, as seems quite reasonable, “irredeemable” must refer to that chapter.
Either “irredeemable” prohibits a return of capital, or lawyers have been writing nonsense into prospectuses for decades.

Your understanding is wrong. Please read the OP or get professional advice re. your own holdings.

GS

[GoSeigen]

I'm happy that substituting the word "repay" or similar makes enough sense to move on from language and debate the statement. Do you agree to the change?

The term "redeem" was being used in the sense of "repay at par".

The author can speak for himself.

GS

[johnhemming]

I have cited examples where the tax man and accountants use the word "redeem" to describe what can happen after a reduction of capital.

There is quite a bit of confusion as to what the function of the reduction of capital process is. It is clearly about the protection of creditors (not shareholders). Hence the fact that it does not describe what happens to shares (preference or ordinary) is not surprising.

[GoSeigen]

I have cited examples where the tax man and accountants use the word "redeem" to describe what can happen after a reduction of capital.

Irrelevant. We are discussing terms which state explicitly that we should refer to the Companies Act for definitions, not the taxman, not accountants, not European Law, not Mr Alaric and not a random dictionary.

There is quite a bit of confusion as to what the function of the reduction of capital process is. It is clearly about the protection of creditors (not shareholders).

No confusion in this reader's mind, so let's drop that personal attack. As I said last time you raised this point "no need to teach grandma to suck eggs".

Hence the fact that it does not describe what happens to shares (preference or ordinary) is not surprising.

Now you've lost me again. Which "description" are we referring to and what has this to do with the substitution of the word "repay" for "redeem"?


GS

[GoSeigen]

However that wording is already in law in the reverse form, so the proposed change would alter nothing.

GS

a) European Law says otherwise.

b) We can argue about the various listing particulars, but there as far as I can tell are none that actually explicitly state that the prefs are not irredeemable and no class vote is required to redeem them in a reduction of capital.

Hence it would make a difference.

You didn't respond to this. Could we restate your b) thus:

b) We can argue about the various listing particulars, but there as far as I can tell are none that actually explicitly state that the prefs are not irredeemable and no class vote is required to repay them in a reduction of capital.


I'm happy that substituting the word "repay" or similar makes enough sense to move on from language and debate the statement. Do you agree to the change?


"redeem" is plain wrong: no vote of any kind is needed to redeem a share.

GS

[stockton]

Your understanding is wrong. Please read the OP ....GS

Well lets do as you suggest - read the OP where we find;

1. Forget prospectuses. The prospectus simply repeats information found elsewhere, incorporating it by reference or in a reworded form.
2. First read the law. What companies can and cannot do with their shares is prescribed in great detail. Terminology used in describing share rights is derived from the law. It is essential background reading. The Companies Act 2006 is here: https://www.legislation.gov.uk/ukpga/2006/46/contents
3. Next read the Company's Articles -- current articles and articles at the time of issue of the shares. The Companies Acts require certain information to be in the articles. The Articles are where the rights of shareholders are laid out.

We can then scan the Companies act and then try Lloyds bank Articles where we find

3.2 The preference shares shall confer upon the holders thereof such rights (including rights of redemption in whole or in part) as may be determined by the directors on allotment, ...

That appears to send us straight back to the document which you have said we should ignore - the OP is somewhat unconvincing.

[johnhemming]

"redeem" is plain wrong: no vote of any kind is needed to redeem a share.

This is the point on which we disagree. The Companies Act 2006 does not redefine or define the ordinary usage of the word deem and its derivatives. It defines a type of shares called "redeemable shares" which can be redeemed on some basis or other. That is it.

That is our disagreement. We should simply agree that we disagree about this. The rest follows on.

HMRC and the ACCA agree with me. I am not going to bother to find other sources. The taxman and an accountants association will do as far as I am concerned.

[GoSeigen]

"redeem" is plain wrong: no vote of any kind is needed to redeem a share.

This is the point on which we disagree. The Companies Act 2006 does not redefine or define the ordinary usage of the word deem and its derivatives. It defines a type of shares called "redeemable shares" which can be redeemed on some basis or other. That is it.

That is our disagreement. We should simply agree that we disagree about this.

I agree this is our disagreement. But agreeing to disagree is not the way to go. We have not even started to discuss this issue. Why?

Because the first step would be for you to present your side and you have not done that.


You have never supplied a definition of redeem/redemption/redeemable. I invite you to do so.


GS

[johnhemming]

You have never supplied a definition of redeem/redemption/redeemable. I invite you to do so.


GS

I supplied a definition on redemption in my post of 17th March 2018 to which you responded
viewtopic.php?f=52&t=10506&p=125625&hilit=definition#p125625

[GoSeigen]

You have never supplied a definition of redeem/redemption/redeemable. I invite you to do so.


GS

I supplied a definition on redemption in my post of 17th March 2018 to which you responded
viewtopic.php?f=52&t=10506&p=125625&hilit=definition#p125625

Well, I apologise for having forgotten that post stating redeem/redemption to mean:

the action of regaining or gaining possession of something in exchange for payment, or clearing a debt."


At the time this was described as a "starting position" [which is where we differed] -- but now, after six weeks' consideration, do we think those are the precise words a judge would consider shareholders should have in mind when they read "redeem" and its derivatives in the Companies Acts and in documents incorporating those Acts?

I ask because "of something" is vague, leaving the "something" undefined -- which may be acceptable in a dictionary but is obfuscatory in these legal documents where "redeem" is used in limited and well-understood contexts. [Also, is the limb "or clearing a debt" relevant to company Articles? Of course we can ignore it for the purposes of this discussion...]



Leaving that reservation aside, what would be the definitions of:
1. redeemable
2. irredeemable

which derive from the above?


GS

[johnhemming]

Sorry, but I don't have the time to go through all of my previous posts and highlight each one that deals with your points.

We don't agree that the Companies Act 2006 overrides all other definitions of the word redeem or redemption in any other document whether created before that act or after it.

I think you need to look at the issue from the perspective of a creditor in the company rather than an investor.

[Alaric]

Aviva, it appears, have accepted they were wrong to make the repayment at par threat.

viewtopic.php?p=135635#p135635

[GoSeigen]

Sorry, but I don't have the time to go through all of my previous posts and highlight each one that deals with your points.

No need to go through old posts and forget the points about imprecision. They don't matter for now.


My query was:

What would be the definitions of:
1. redeemable
2. irredeemable

in relation to shares?


GS

[Wizard]

Aviva, it appears, have accepted they were wrong to make the repayment at par threat.

viewtopic.php?p=135635#p135635

That will go down well with holders of Aviva ordinary shares!

I do wonder if they decided to jump before being pushed. Indeed I hope that is the case, because it adds to the body of evdence that others will have to think very carefully before considering wnythng similar.

Terry.

[Alaric]

Indeed I hope that is the case, because it adds to the body of evdence that others will have to think very carefully before considering wnythng similar.

No doubt other companies will want to restructure or return their capital and this may involve Preference shares. The clear message is that you should behave as the market expects you to behave and make offers at or above market price. Equally you shouldn't listen to lawyers who tell you that you have "in the money" options that were never designed into the conditions of issue.

[GoSeigen]

Sorry, but I don't have the time to go through all of my previous posts and highlight each one that deals with your points.

We don't agree that the Companies Act 2006 overrides all other definitions of the word redeem or redemption in any other document whether created before that act or after it.

I think you need to look at the issue from the perspective of a creditor in the company rather than an investor.

An observation about rhetoric:

The usual response to being asked to define "redeemable" and "irredeemable" is an ad hominem attack. There is a very logical cause for this: not having a clue what the words mean!

No one likes admitting that they don't know -- it's much more comfortable to change the subject by deflecting blame on someone else "I've no time for your questions" or by accusing them of lack of empathy "you need to look at it from another point of view", or by creating a ridiculous straw man "the Companies Act 2006 overrides all other definitions of the word redeem or redemption in any other document whether created before that act or after it."


The double-speak is very interesting too: when someone claims "Everyone knows what irredeemable means" they are actually saying "I haven't a clue what irredeemable means -- but I know what I want it to mean!"


Another strategy is waffle -- paragraphs of rambling plausible-sounding nonsense; passages of text referencing six or seven random unconnected sources with no logical connecting thread. And of course there is the short bald assertion, no evidence, but repeated ad nauseam until everyone either agrees or goes away.



Which is more plausible: a lot of hand-waving accompanied by the above rhetorical avoidance strategies, or the following simple and succinct definitions?

-Redeemable shares: Defined in s684 of the 2006 Companies Act
-Redeem: repay redeemable shares in accordance with their redemption terms (as described in Chapter 3 of the same Act)
-Irredeemable: issued without any redemption terms; not redeemable

...all of which are entirely consistent with the words' use in both the Companies Acts and in the terms of shares found in any company's Articles.


GS

[johnhemming]

It isn't rhetoric. I have studied rhetoric to a greater extent than most politicians. It is a simple point. We have been around the houses on this. My most recent substantive response was to find the post where I had put a definition in for redemption that you claimed that I hadn't.

To do that takes time. I don't mind spending some time on this, but there is a point at which Groundhog Day gets futile.

That is not an ad hominem attack.

[GoSeigen]

It isn't rhetoric. I have studied rhetoric to a greater extent than most politicians. It is a simple point. We have been around the houses on this. My most recent substantive response was to find the post where I had put a definition in for redemption that you claimed that I hadn't.

To do that takes time. I don't mind spending some time on this, but there is a point at which Groundhog Day gets futile.

That is not an ad hominem attack.

I asked for your definition of "redemption" AND the derivative "redeemable" (and if poss. "irredeemable"). You referred to a post about redemption only.


It's not time consuming to view your own posts. It took about 30 sec to find all your posts mentioning the word "redeemable" in date order. Here they are:

search.php?keywords=redeemable&terms=all&author=johnhemming&sc=1&sf=all&sr=posts&sk=t&sd=a&st=0&ch=-1&t=0&submit=Search


None of them have any definition or precise meaning of the word AFAICS, just plenty of discussion of its use.


GS