Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

[Dod101]

Arb

Methinks you are being deliberately obtuse or it is too early in the morning. The price is fundamentally tax of course. absolutezero said he would never hold shares in an ISA for the reasons he mentioned. I suspect that I would be into higher rate tax if all my dividends were unsheltered (including my other taxed income) but even if just at the basic rate that is a high price compared to now. Certificates are 'slow to operate' by which I assume you mean to buy or sell to which you could add 'and expensive'. being fundamentally LTBH it is only occasionally that that matters to me. I do not understand why you cast aside so lightly the lack of shareholder enfranchisement, as is being illustrated at the moment with Unilever, and the fact that you/we are totally trusting the ISA manager to keep proper records and be totally trustworthy.

I take absolutezero's point which is why I will probably leave my reamaining certificated holdings as they are and not transfer any more into my ISAs. Like many I guess, I have been transferring certificated holdings in to an ISAS each tax year for many years. It is an attractive proposition because apart from the loss of security and shareholders' rights it is otherwise a no brainer with total freedom to chop and change holdings without regard to the tax consequences.

Dod

[moorfield]

You are correct.
I refuse to have an ISA until and unless CREST holdings can be held inside an ISA.
Paying tax is the price I pay for
1 - having my shareholder rights and
2 - sleeping at night knowing my shares belong to me and aren't likely to end up a la Beaufort Securities.

absolutezero, you've created a First World Problem here for yourself, no?

Out of interest, have you needed to exercise your shareholder rights in a manner that you couldn't do as a nominee, and what for?

With reference to Beaufort Securities what risk are you trying to mitigate that hasn't already been mitigated for you, by the FSCS:

https://www.fscs.org.uk/what-we-cover/i ... s-limited/

We expect nearly all of the firm's individual and small business customers will be protected by FSCS so that assets and cash can be returned without any loss.

[Arborbridge]

Arb

Methinks you are being deliberately obtuse or it is too early in the morning.
Dod

I wasn't being obtuse, but it was to early in the morning! I think I misread your post.

To summarise my own position: all my holdings are in ISAs or SIPPs and I'm not interested in any advantage certfied holdings give.
I think I was muddled because you have expressed a liking for certified holdings whilst at the same time have holdings in ISAs.

If one has a certified holdings one has a chance of voting or other privileges: big deal. It doesn't interest me because my influence is almost zero and not worth throwing away the advantages given by nominee holdings within ISAs and SIPPs. Anyone who pays more tax principally for the right to vote has an over-inflated idea of his own importance in the system: the price is too heavy.


I think we largely agree.

Arb.

[Alaric]

To summarise my own position: all my holdings are in ISAs or SIPPs and I'm not interested in any advantage certfied holdings give.

There's a lot of convenience in having holdings outside of ISAs and SIPPs in custody accounts. The continued existence of certified holdings does have one consequence though. It means those who would like to introduce a hefty platform charge for share holdings feel unable to do so on taxed accounts, given the arbitrage clients would have of converting their holdings back to paper even at the one-off cost of a paper certificate.

[Arborbridge]

BTW, I didn't mention the security issue, but I don't mean to make light of Absolutezero's point it as it is very serious. It seems to me that the Beaufort Securities case has made it a whole lot more risky than we had formerly believed, but this deserves a new thread to itself.

The change (or "realisation") is this: most people here had argued that the assets were ringfenced and that the main problem for investors was the time taken to sort out the mess during which the account would be frozen. It now seems (if I read it correctly) that assets are not entirely ring fenced - and never were - they can be raided to defray the costs of sorting out the mess.
It's not just cash that can be raided, but share holdings.


Arb.

[absolutezero]

So presumably all your shareholdings are outside ISAs? I think many HYPers (not all, and you may not be one of them) would find that rather expensive, and a cure worse than the disease as a result...

You are correct.
I refuse to have an ISA until and unless CREST holdings can be held inside an ISA.
Paying tax is the price I pay for
1 - having my shareholder rights and
2 - sleeping at night knowing my shares belong to me and aren't likely to end up a la Beaufort Securities.

I had holdings in s sponsored Crest account, which ended up with Beaufort.

TJH

Didn't they get converted into nominee when Beaufort took over?
If that happened then I'd be converting into certificated format.

[absolutezero]

You are correct.
I refuse to have an ISA until and unless CREST holdings can be held inside an ISA.
Paying tax is the price I pay for
1 - having my shareholder rights and
2 - sleeping at night knowing my shares belong to me and aren't likely to end up a la Beaufort Securities.

absolutezero, you've created a First World Problem here for yourself, no?

Out of interest, have you needed to exercise your shareholder rights in a manner that you couldn't do as a nominee, and what for?

With reference to Beaufort Securities what risk are you trying to mitigate that hasn't already been mitigated for you, by the FSCS:

https://www.fscs.org.uk/what-we-cover/i ... s-limited/

We expect nearly all of the firm's individual and small business customers will be protected by FSCS so that assets and cash can be returned without any loss.

In the event of fraud by your broker you are only covered by FSCS for the first £50,000. Not enough for most of the likes of us on here.
The Beaufort thing is a totally different kettle of fish in that PWC wanted to dip into individual holders' portfolios to pay themselves massive fees. As far as I get it, Beaufort's records tallied up with individual investors' records and there wasn't much (any?) indication of dodgy bookkeeping or fraudulent activity.
The FSCS did not protect against the greed of PWC and it was only a public fuss that altered the situation.

Moderator Message:
If we want to discuss the advantages or disadvantages of ISAs and SIPPs relative to certificated holdings, this is not the place. Keep to the topic, please. -- MDW1954

[Arborbridge]

As MDW pointed out, this isn't the correct forum. Would anyone like to start the ball rolling in some other place (Brokers and Share dealing?) and cross post here? There are some possible threads already, but maybe not with our practical approach.

Arb.

[moorfield]

As MDW pointed out, this isn't the correct forum.

Returning to the (inconclusive it seems) 240+-post/5800+-view topic on the internal corporate structure of a low yielder, might the best course of action for a Practitioner of HYP who is pickering about this be simply to sell ULVR and find a new home yielding > 4.2% ish ?

[Arborbridge]

As MDW pointed out, this isn't the correct forum.

Returning to the (inconclusive it seems) 240+-post/5800+-view topic on the internal corporate structure of a low yielder, might the best course of action for a Practitioner of HYP who is pickering about this be simply to sell ULVR and find a new home yielding > 4.2% ish ?

Indeed - and it's already been suggested, and some have done it

[Gengulphus]

If one has a certified holdings one has a chance of voting or other privileges: big deal. It doesn't interest me because my influence is almost zero ...

Depends what one means by "almost zero" - just how close to zero does one's influence need to be to count as that? If one's interest is of the rough order of one part in a million or less (which is very roughly the position of anyone with £50k or less worth of Unilever plc shares), I think few would disagree that one's influence was almost zero: even hundreds of such private investors all voting the same way would swing the vote outcome by less than 0.1%.

But what if one's influence were of the order of one part in a thousand? Then hundreds of private investors all voting the same way would have a very significant effect... Any one of them might still reckon that their own influence was almost zero, but if there's a reasonably strong consensus among them (doesn't need to be 100%, just significantly more than 50%), they will have influence - provided they vote!

I can't answer that question about how close to zero one's influence needs to be to be totally uninteresting, but I did stumble across some interesting input about it recently. This isn't actually the first unification of an Anglo-Dutch dual-company structure that has been proposed this year: RELX successfully did one a few months ago. I believe it's even a unification of a company that has been selected for some HYPs in the past (though its current yield of about 2.5% means it's not a HYP purchase candidate now), under its former name of Reed Elsevier (I actually stumbled on this while double-checking a vague memory that RELX now = Reed Elsevier then). The input is the announcement of the results of its Court Meeting and General Meeting, which indicate that 1855 shareholders voted in the Court Meeting, and therefore that each voting shareholder did have a level of influence of the number-of-shareholders vote that was much more like one part in a thousand than one part in a million. (Whereas they voted an average of 124074/63 = 1969 shares each, out of about 836.5m shares, so their average influence on the number-of-shares vote was much more like one part in a million than one part in a thousand.)

Only 63 (3.40%) of them voted against the RELX scheme, so that unification passed easily. That's not necessarily a good indication of what's likely to happen to the Unilever unification proposal, though, because there is an important difference between the two: RELX unified as a UK company, while Unilever is proposing to unify as a Dutch company. So as far as UK shareholders of RELX were concerned, they started with a UK company paying dividends under UK tax law and ended with a UK company paying dividends under UK tax law - i.e. essentially no change on that count - and presumably the 63 who voted against the scheme had other reasons. (So it would have been Dutch holders of shares in the Dutch company who would have been faced with their dividends unnecessarily being at risk from tax changes in both countries when they would prefer only to be at risk from Dutch tax changes. It would be mildly interesting to know what the Dutch press said about the RELX unification and how its Dutch company shareholder vote(s) went - but I'm not motivated enough to try to find the Dutch equivalent of RNSes, etc!)

Anyway, I neither can nor want to decide for anyone else whether they should regard one-part-in-a-thousand type influence in a comparatively rare type of shareholder vote (*) as "almost zero" or not. All I'm doing here is presenting a bit of evidence that it really is that sort of level and not the one-part-in-a-million type, to help people decide the question for themselves.

(*) Court Meeting votes are not an everyday type of vote, nor even an every-year type like company general meeting votes. I believe I've only seen them when a company is using a scheme of arrangement to do something. They do however tend on average to be quite a bit more significant for shareholders (essentially, bothering the High Court with trivialities is not encouraged!), with the most significant ones tending to be cash takeovers done by schemes of arrangement. This Unilever unification proposal isn't anything like as significant as that - if it goes through, the compulsory effect on people's HYPs will basically be a bit of extra tax admin for some and an increased vulnerability to tax changes for all, rather than what is basically an enforced sale. So another bit of input I would supply into decisions about whether to have certificated / CREST holdings for their voting rights is that it does affect more significant events than this one.

And a third is that it isn't an either/or decision. It is entirely possible to hold the bulk of your portfolio in ISAs, but a small holding of each share as a certificate (or in a CREST account if you can find a broker who will supply one). At a portfolio yield averaging about 5%, a certificated/CREST portfolio of up to around £40k would produce dividend income within the £2k dividend allowance and so not produce an Income Tax liability, and that would cater for a 15-25 share HYP of £1k holdings with a good deal of headroom for possible capital growth, and it's also pretty unlikely to produce big enough gains to force one to incur a CGT liability. It could also provide 'emergency fund' type protection for the possibility (hopefully pretty remote) of one's ISA broker suffering from problems that cause the ISA to be "frozen" for a significant length of time while they're sorted out: selling certificated holdings is not all that fast a process, but it's a lot quicker than that type of sorting-out work is liable to be! Not saying it doesn't have issues: it does, mainly in terms of the extra admin that it imposes on one (especially at the part, before you've told companies where to transfer dividends, send shareholder communications, etc) but some might like the idea on balance.

Gengulphus

[Walrus]

If one has a certified holdings one has a chance of voting or other privileges: big deal. It doesn't interest me because my influence is almost zero ...

Depends what one means by "almost zero" - just how close to zero does one's influence need to be to count as that? If one's interest is of the rough order of one part in a million or less (which is very roughly the position of anyone with £50k or less worth of Unilever plc shares), I think few would disagree that one's influence was almost zero: even hundreds of such private investors all voting the same way would swing the vote outcome by less than 0.1%.

But what if one's influence were of the order of one part in a thousand? Then hundreds of private investors all voting the same way would have a very significant effect... Any one of them might still reckon that their own influence was almost zero, but if there's a reasonably strong consensus among them (doesn't need to be 100%, just significantly more than 50%), they will have influence - provided they vote!

I can't answer that question about how close to zero one's influence needs to be to be totally uninteresting, but I did stumble across some interesting input about it recently. This isn't actually the first unification of an Anglo-Dutch dual-company structure that has been proposed this year: RELX successfully did one a few months ago. I believe it's even a unification of a company that has been selected for some HYPs in the past (though its current yield of about 2.5% means it's not a HYP purchase candidate now), under its former name of Reed Elsevier (I actually stumbled on this while double-checking a vague memory that RELX now = Reed Elsevier then). The input is the announcement of the results of its Court Meeting and General Meeting, which indicate that 1855 shareholders voted in the Court Meeting, and therefore that each voting shareholder did have a level of influence of the number-of-shareholders vote that was much more like one part in a thousand than one part in a million. (Whereas they voted an average of 124074/63 = 1969 shares each, out of about 836.5m shares, so their average influence on the number-of-shares vote was much more like one part in a million than one part in a thousand.)

Only 63 (3.40%) of them voted against the RELX scheme, so that unification passed easily. That's not necessarily a good indication of what's likely to happen to the Unilever unification proposal, though, because there is an important difference between the two: RELX unified as a UK company, while Unilever is proposing to unify as a Dutch company. So as far as UK shareholders of RELX were concerned, they started with a UK company paying dividends under UK tax law and ended with a UK company paying dividends under UK tax law - i.e. essentially no change on that count - and presumably the 63 who voted against the scheme had other reasons. (So it would have been Dutch holders of shares in the Dutch company who would have been faced with their dividends unnecessarily being at risk from tax changes in both countries when they would prefer only to be at risk from Dutch tax changes. It would be mildly interesting to know what the Dutch press said about the RELX unification and how its Dutch company shareholder vote(s) went - but I'm not motivated enough to try to find the Dutch equivalent of RNSes, etc!)

Anyway, I neither can nor want to decide for anyone else whether they should regard one-part-in-a-thousand type influence in a comparatively rare type of shareholder vote (*) as "almost zero" or not. All I'm doing here is presenting a bit of evidence that it really is that sort of level and not the one-part-in-a-million type, to help people decide the question for themselves.

(*) Court Meeting votes are not an everyday type of vote, nor even an every-year type like company general meeting votes. I believe I've only seen them when a company is using a scheme of arrangement to do something. They do however tend on average to be quite a bit more significant for shareholders (essentially, bothering the High Court with trivialities is not encouraged!), with the most significant ones tending to be cash takeovers done by schemes of arrangement. This Unilever unification proposal isn't anything like as significant as that - if it goes through, the compulsory effect on people's HYPs will basically be a bit of extra tax admin for some and an increased vulnerability to tax changes for all, rather than what is basically an enforced sale. So another bit of input I would supply into decisions about whether to have certificated / CREST holdings for their voting rights is that it does affect more significant events than this one.

And a third is that it isn't an either/or decision. It is entirely possible to hold the bulk of your portfolio in ISAs, but a small holding of each share as a certificate (or in a CREST account if you can find a broker who will supply one). At a portfolio yield averaging about 5%, a certificated/CREST portfolio of up to around £40k would produce dividend income within the £2k dividend allowance and so not produce an Income Tax liability, and that would cater for a 15-25 share HYP of £1k holdings with a good deal of headroom for possible capital growth, and it's also pretty unlikely to produce big enough gains to force one to incur a CGT liability. It could also provide 'emergency fund' type protection for the possibility (hopefully pretty remote) of one's ISA broker suffering from problems that cause the ISA to be "frozen" for a significant length of time while they're sorted out: selling certificated holdings is not all that fast a process, but it's a lot quicker than that type of sorting-out work is liable to be! Not saying it doesn't have issues: it does, mainly in terms of the extra admin that it imposes on one (especially at the part, before you've told companies where to transfer dividends, send shareholder communications, etc) but some might like the idea on balance.

Gengulphus

I genuinely never thought I'd sell my Unilever holdings. Today I sold out with the intention of buying back once all of this gets settled. I can't see it flying away from here so it will probably now be subject to a bid!!! But I don't like all of the shenanigans and feel better off out of it.

[idpickering]

I genuinely never thought I'd sell my Unilever holdings. Today I sold out with the intention of buying back once all of this gets settled. I can't see it flying away from here so it will probably now be subject to a bid!!! But I don't like all of the shenanigans and feel better off out of it.

Me neither Walrus, so I feel your pain. I'm not saying I'll never buy back in though, we'll see.

Ian.

[Darka]

I don't intend to sell, I've sold worse shares in the past and Unilever have done very well for me over the years.
I top sliced a month or so ago, but intend to hold and ignore the noise.

regards,
Darka

[Dod101]

I really do not understand why people would sell Unilever in the current situation. As far as we know the trading is still unchanged and there is no reason why it should because of the proposals. If the proposals go through the risk of holding them may marginally increase but that does not exactly make them a basket case.

Dod

[Walrus]

I really do not understand why people would sell Unilever in the current situation. As far as we know the trading is still unchanged and there is no reason why it should because of the proposals. If the proposals go through the risk of holding them may marginally increase but that does not exactly make them a basket case.

Dod

I do agree with you, but on the basis I find myself thinking about Unilever on a daily basis means I should take action. One advantage over the market is being able to get out fairly easily as opposed to trusts and funds.

I'll come back in 3 months and see how the land lies with an eye to buying back in. The cost is any upside over the next 3 months. I'll pay that opportunity cost to not have to worry about this particular holding over this period of uncertainty.

Thanks

[Darka]

When I think of Unilever, I just remind myself of this from their website:

"On any given day, 2.5 billion people use Unilever products to feel good, look good and get more out of life – giving us a unique opportunity to build a brighter future."

https://www.unilever.com/about/who-we-a ... -Unilever/

regards,
Darka

[Bouleversee]

When I think of Unilever, I just remind myself of this from their website:

"On any given day, 2.5 billion people use Unilever products to feel good, look good and get more out of life – giving us a unique opportunity to build a brighter future."

https://www.unilever.com/about/who-we-a ... -Unilever/

regards,
Darka

Really? And what thoughts then go through your head?

[Bouleversee]

I simply don't have time to read through all this thread but I am aware of Unilever's intentions and of the effective disenfranchisement of holders via platforms/nominee accounts, which is disgraceful as most shares are held in this way these days. Time the law caught up. What I am not clear about is whether a fund with a huge holding of Unilever (or any other company seeking approval of something) also only has one vote or whether in their case there is any relationship to the number of shares they hold in that company. Does anyone know?

FWIW my shares are held by IWeb and I haven't had a word from them about Unilever's plans to go Dutch or any notification of the meeting or invitation to vote. I have two holdings, one in an ISA and one in a dealing account.

[Dod101]

The answer Boulerversee is quite straightforward. In the case of an Ordinary or a Special Resolution the number of shares cast is the deciding factor and so it will normally be the case that the small shareholder will be overwhelmed by the institutional ones holding hundreds of thousands if not a million or two shares. However, in the case of a Scheme of Arrangement (which is how Unilever is choosing to organise this matter), there needs to be a so called Court meeting (that is they need to go to a Court of Law to sanction this action )and the Court requires them to hold a Court Meeting. At this meeting, not only is there a test of the number of shares cast but also there has to be a majority (in number) of shareholders voting in favour of the proposals. There is usually a great number of small shareholders compared to the number of institutional shareholders and this is seen as Unilever's weak spot. However, the rise in nominee holdings by individuals via various platforms, means that the platforms' aggregate holdings will apparently count as one shareholder, and not the number of underlying beneficial holders . Unilever are suggesting a way round this is to convert at least some of those shares into a certificate and thus appear on the share register.

If this affair does nothing else but waken people up to the shortcomings of the nominee system for ISAs and SIPPs it will have been of some benefit.

Dod