Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

[Breelander]

There was a time limited offer to transfer free of charge the registrar-held DIs to an account of my choosing, and I transferred them to my CREST account.

Very few people have a sponsored CREST account and it is near-impossible to find a broker offering one these days. A nominee account is not the same as a CREST account. Anyway, you cannot have a CREST account in an ISA - the HMRC rules say it has to be a nominee account.

[Dod101]

Thanks Bree I had not noticed that. I hold my shares in certificated form and I rather like that. I do not want to be forced down a nominee route. Another reason for rejecting this proposal.

Come to think of it though, this is just a sign of things to come because I think there is a proposal to dematerialise all certificated holdings in the not so distant future.

Sounds as if Unilever is getting a bit rattled to be sending out emails as from the Chairman. Good.

Dod

[Alaric]

Shell RDSA and RBSB shares are not CDIs - that's the crucial difference.

Back in the day when I held shares in certificate form, there was something special about Shell shares. Looking at the old paperwork, I had holdings in "Royal Dutch Shell Nominee Service" from 2005. In the small print though, they offer to send a share certificate, so evidently not a CDI, even if it looks like one.

[mike]

There was a time limited offer to transfer free of charge the registrar-held DIs to an account of my choosing, and I transferred them to my CREST account.

Very few people have a sponsored CREST account and it is near-impossible to find a broker offering one these days. A nominee account is not the same as a CREST account. Anyway, you cannot have a CREST account in an ISA - the HMRC rules say it has to be a nominee account.

Those DIs resulting from the CREST & SIPP shares were held in the relevant account without problem.

Just to re-confirm, the S32 DIs are also in my SIPP which by definition is nominee. They receive the divis just as a normal share.

[Breelander]

Just to re-confirm, the S32 DIs are also in my SIPP which by definition is nominee. They receive the divis just as a normal share.

As I said, whether or not a CDI can be held in a nominee account is up to each broker to decide for themselves. Some will be prepared to handle the extra work involved, others will not. The fact that your broker does allow CDIs in their nominee account does not alter the fact that mine didn't.

[MDW1954]

Thanks Bree I had not noticed that. I hold my shares in certificated form and I rather like that. I do not want to be forced down a nominee route.
Dod

But doesn't that mean that you are getting clobbered for a lot of income tax, that you wouldn't have to pay if they were held in an ISA?

I no longer have any certificated holdings at all.

MDW1954

[Dod101]

[
But doesn't that mean that you are getting clobbered for a lot of income tax, that you wouldn't have to pay if they were held in an ISA?

Yes it does but despite my best efforts, I still have about 30% by value of my total holdings in certificates. I transfer the max value into an ISA most years. Still, the really high yielders are all protected in an ISA or my SIPP. Of course the other point is that I have held the certificated shares for a long while and so CGT also is a consideration. So far the tax on dividends is fairly modest.

Dod

[Alaric]

Of course the other point is that I have held the certificated shares for a long while and so CGT also is a consideration.

It's quite straightforward to transfer paper certificates to nominee holdings. Print off forms for each share and send them to the Broker with the certificate. If you need or want to sell, it's much easier.

[Breelander]

It's quite straightforward to transfer paper certificates to nominee holdings. Print off forms for each share and send them to the Broker with the certificate. If you need or want to sell, it's much easier.

True, but that doesn't make any difference to the tax position.

To shelter from tax you need to transfer to an ISA, but you can't just transfer certificates into an ISA, you have to sell outside the ISA, transfer in the cash then purchase inside the ISA. Most brokers will do that for you at a single trading fee and a close spread - but it realises a gain for tax purposes, I'm afraid.

[idpickering]

To IDP: wot no pickering? You rather surprised me by your precipitatness.


Arb.

Not on this occasion no Arb. 1. It takes away all the doubt. 2. TATE yield is higher. I might be wrong, but I'm happier out of all the kerfuffle regarding Unilever.

Ian.

[Dod101]

Of course the other point is that I have held the certificated shares for a long while and so CGT also is a consideration.

It's quite straightforward to transfer paper certificates to nominee holdings. Print off forms for each share and send them to the Broker with the certificate. If you need or want to sell, it's much easier.

I appreciate that but as Bree says it still leaves the CGT position open. I also rather like paper certificates because, as in the case of Unilever, my name is on the share register I get all the stuff direct to me rather than via some nominee. The other point is that I prefer the security of a direct holding and will not voluntarily surrender my certificates for a nominee. If I am selling of course it is much more convenient to do as you suggest but I am not a trader and usually a sale will be a considered move.

Dod

[Arborbridge]

If I am selling of course it is much more convenient to do as you suggest but I am not a trader and usually a sale will be a considered move.

Dod

That could be taken as a "slight" to those of us with nominee accounts, as it implies that Bree or myself do not make "considered moves". You don't need to have a certificate in your filing cabinet to make a "considered moved"!

Arb.

[Gengulphus]

We believe it to be unlikely that abolition will not happen, but nevertheless we have a robust fallback solution which is free of Dividend Withholding Tax.

That was some form of capital distribution I believe. That would be potentially liable for UK CGT and if this form of disguised dividend came into widespread use, you couldn't rule out a UK or Dutch Government legislating to treat it as dividend.

As far as the Dutch are concerned, the Unilever scheme document seems pretty clear that yes, the "dividend substitution payments" are capital distributions, and I don't see any reason why the UK would think they're not (but see below about the UK tax treatment).

And it seems fairly clear to me that on the current Dutch government's plans, they'll have no great interest in legislating to treat it differently: as things stand, they don't get any withholding tax from Unilever plc dividends paid to non-Dutch taxpayers, they're willing to give up the withholding tax on Unilever NV dividends paid to non-Dutch taxpayers, and AFAIAA they don't have CGT at all (*). And from the start of 2020, their plans say they won't collect any withholding tax or CGT at all. They might introduce legislation to treat it as a dividend for Dutch income tax purposes, but that will only affect Dutch taxpayers - they would have to bring withholding tax (or something similar) back in to affect non-Dutch taxpayers.

As far as UK tax is concerned, the Unilever scheme document seems pretty clear that the payment one gets will be treated as a dividend regardless of whether you choose to receive it as a dividend or a "dividend substitution payment" capital distribution. And that seems perfectly consistent with the UK tax law change that came in a few years ago saying that if shareholders get to choose individually (**) whether to receive a payment from a company as a dividend or as capital, it gets treated as dividend income regardless of the choice they make. So if I've understood that correctly, one basically can rule out a UK government legislating to treat it as dividend - because they've already done so! (***)

So as long as the current tax situation (both Dutch and UK) is concerned, I don't see anything much wrong with the Unilever scheme. But for UK taxpayers who are not Dutch taxpayers as well (i.e. probably most of us), after the scheme they will be vulnerable to both the risk of the UK government changing its tax rules/plans and the risk of the Dutch government changing its tax rules/plans, while as the company structure currently stands, they're only vulnerable to the first of those risks. So basically, for such taxpayers, adopting the scheme means taking on an extra tax risk that they don't actually need to.

That isn't of course a decisive argument - depending on the size of the risk and the importance of other considerations, it might be outweighed by those other considerations. But the risk of the Dutch government changing its tax rules/plans appears to me to be significant (not major, but a good deal more than negligible): the Reuters article scrumpyjack linked to earlier in this thread seems pretty clear that the abolition of the withholding tax is not popular in the Netherlands - nor even in its governing coalition. And the fact that the Dutch government is in practice always a coalition and formed after an often-lengthy negotiation between the parties does IMHO make such points (i.e. ones that can't be all that important to the big picture of the country's welfare, but do have fairly strong political support in one direction or the other) less likely to be decided by whether they're in or out of any particular party's overall package and more likely to be settled by the coalition negotiations.

The main other considerations I've seen are those about the arrangements for UK shareholders to hold the new Unilever NV shares, including the transition to them, and about what the benefits are for the company. I haven't yet looked at the former in detail - they're decidedly long and complex - but my first impressions on skimming them are less than favourable (and I think that matches what others have said above) and I'm pretty certain that they'll at best end up as neutral, not favourable. And the benefits to the company described in the scheme document seem decidedly vague and unquantified - I think they're summed up in the following paragraph:

The Boards believe that a single holding company will bring greater simplicity and more flexibility to make strategic changes to the Unilever Group’s portfolio in the future, should Unilever choose to do so, including through equity-settled acquisitions or demergers. Although Unilever does not currently plan any major portfolio change, the Boards believe it is appropriate to create a corporate structure that provides Unilever with the strategic flexibility and optionality to do so.

I'm not especially in favour of the companies I'm a shareholder in doing "equity-settled acquisitions or demergers" (the latter in particular usually just create hassle for me) and I don't think I've noticed any particular difficulties Unilever has had with making strategic changes to their portfolio, in particular by acquiring and disposing of brands.

Also, while various people have commented that the current dual-company structure must be costing Unilever more than the simplified structure would, I have not found a single word in the scheme document about anticipated cost savings from the simplification proposals, let alone any figure for them. It's possible I've missed something, of course, but it looks very much to me as though any cost savings (if they exist at all) are so laughably small compared with the size of Unilever that the Board reckons putting them forward as a reason for the scheme would be seen as grasping at straws, and so weaken their case rather than strengthen it.

So to sum up, as far as I can currently see, the proposed simplification adds an unnecessary and non-negligible tax risk for me, might make the method of holding the shares less attractive to me (though I've yet to determine whether it will do that or just be neutral), and the only argument the Board has put forward in favour of it seems to be to make it easier for them to do things of a general type I don't especially want them to do. Even with the holding-method issue not yet resolved, that adds up to a clear case against the simplification proposal for me.

(*) Before every CGT payer rushes to emigrate to the Netherlands, check all their taxes: AFAIAA, they do still have a wealth tax!

(**) Rather than as a joint decision binding on all shareholders as could be done with a shareholder resolution.

(***) And I for one am not sorry about that: I've wasted far too much of my life getting to grips with the tax consequences of the "B share schemes" that allowed shareholder such choices when they still really did give a choice between being taxed by Income Tax or by CGT. I probably improved my tax situation somewhat by doing so - but I'm not entirely certain about that, and I'm rather more doubtful that I got enough overall benefit to really be a good 'pay rate' for the time they needed - taking the bigger costs for the company of such a scheme over a simple dividend into account as well as any tax benefit. And as the size of any overall benefit depends on the size of the shareholding and the time and effort required don't, that has be much more doubtful for smaller shareholders than me...

Gengulphus

[Raptor]

Moderator Message:
Although interesting, this topic needs to go back to the OPs post. Can we discuss whether to hold in Nominee or Hold Certificates elsewhere, unless it is directly connected to the Unilever discussion. Thanks in advance. Raptor.

[Dod101]

If I am selling of course it is much more convenient to do as you suggest but I am not a trader and usually a sale will be a considered move.

Dod

That could be taken as a "slight" to those of us with nominee accounts, as it implies that Bree or myself do not make "considered moves". You don't need to have a certificate in your filing cabinet to make a "considered moved"!

Arb.

I see that Raptor has commented but I crave his indulgence to respond to Arb as a nominee account is what we will get if the Unilever proposals go through.

I have no idea how my comment could be considered a 'slight' to anyone holding shares in a nominee account. Most of my shares are held that way anyway. What I am saying is that if I want to sell I will accept that transferring the shares into a nominee account will cause a delay but I am content with that. What anyone else does or not is none of my business.

Dod

[Dod101]

What Gengulphus has said in some detail reflects more or less my concerns. In my email to the Unilever Chairman I made the very point about no discernible cost savings, at least if there were any one would expect those to be spelled out in the documents. Neither has there been any discussion about the pros and cons of moving to Rotterdam; just a bald statement that they have decided.

Dod

[Arborbridge]

I have no idea how my comment could be considered a 'slight' to anyone holding shares in a nominee account.
Dod

Then let me explain. You wrote "If I am selling of course it is much more convenient to do as you suggest but I am not a trader and usually a sale will be a considered move."

The remark is a sneer and suggests that people with a nominee account might prefer the convenience (i.e., act quickly) whereas investors like you make "considered" moves and do not need the convenience. So you've created a polarity between those acting as impulsive traders who need the convenience and sensible people like yourself, no doubt, who act only after considered moves.

Myself and Breelander have nominee acounts, and I can assure you that we take a great deal of time considering our moves, and that the convenience is valuable when eventually putting that move into action. It is not right to imply in response to Bree's pointing out the convenience of a nominee account, that we are "traders" or make impulsive moves".

End of.

Arb.

[vrdiver]

Well, after reading around a bit, I've come to the conclusion that the current ULVR dual structure suits me fine and the proposal to merge the two entities and be based in Holland brings me no advantage.

To that end, I've voted my shares against the merger. It will be interesting to see the final figures.

VRD

[csearle]

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Moderator Message:
Please can we draw a line under this argument. It is well off the OP's topic. Thanks. Also the whole thread is much more suited to a ULVR board rather than HYP! - Chris

[Arborbridge]

To IDP: wot no pickering? You rather surprised me by your precipitatness.


Arb.

Not on this occasion no Arb. 1. It takes away all the doubt. 2. TATE yield is higher. I might be wrong, but I'm happier out of all the kerfuffle regarding Unilever.

Ian.

I'm still in the "wait and see" camp - we'll have to disagree on this one. Tate's yield maybe a bit higher, but over the past ten years ULVRs' dividend growth rate has outstripped that of Tate by double. (x1.46 increase for Tate to 3.x for ULVR). I haven't worked through the numbers, but I doubt the problems concerning the tax position would make up the difference.
I'm dorising it for now.