TIDMWTG
RNS Number : 2880J
Watchstone Group PLC
09 April 2020
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF ARTICLE 7 OF EU REGULATION 596/2014.
Watchstone Group plc
( " Watchstone " or the "Company")
PROPOSED SHARE PREMIUM REDUCTION AND RETURN OF CASH AND NOTICE
OF GENERAL MEETING
Further to its announcements on 10 February 2020 and 25 March
2020, Watchstone Group plc (LON:WTG) announces today that it has
published an explanatory circular ("Circular") for Shareholders of
the Company convening a General Meeting and inviting Shareholders
to approve resolutions to authorise a proposed reduction of the
Company's share premium account ("Share Premium Reduction") and a
proposed return of cash to Shareholders ("Return of Cash"). The
Circular contains details of the formal notice of the General
Meeting to be held at Herbert Smith Freehills LLP, Exchange House,
Primrose Street, London, EC2A 2EG, at 10:00 a.m. on 27 April 2020
(the "General Meeting").
-- The proposed Return of Cash to Shareholders in June 2020 will
be approximately GBP50.5 million in aggregate subject to
Shareholder and Court approval.
-- The effect of the proposed Share Premium Reduction and Return
of Cash will be that for every fully paid ordinary share of 10
pence each held at the Record Date (as defined in the Circular), a
shareholder will receive 110 pence in cash.
-- Trading in Ordinary Shares ex-entitlement to Return of Cash
is expected to commence on 11 June 2020 with the expected dispatch
of cheques to Shareholders or crediting of Shareholders' CREST
accounts (as appropriate) in respect of Return of Cash
entitlements, on or around 30 June 2020.
In view of the UK Government placing restrictions on travel and
other matters because of the COVID-19 situation ("Stay at Home
Measures"), Shareholders will not be permitted to attend the
General Meeting in person. Details of how Shareholders can access
the General Meeting by electronic means may be obtained by emailing
info@watchstonegroup.com , however please note that remote
participation will be for information purposes only and will not be
a formal part of the meeting. Shareholders are also invited to
submit any questions via email to info@watchstonegroup.com by 10.00
a.m. on 25 April 2020. The impact of COVID-19 on the General
Meeting is explained further below.
The Circular, together with the notice of the General Meeting
will be made available on the Company's website at
https://www.watchstonegroup.com/investors/shareholder-information/
.
The Circular provides Shareholders with information about the
background to, and reasons for, each of the Share Premium Reduction
and Return of Cash and explains why the Directors of the Company
("Board") consider these to be in the best interests of the
Shareholders and the Company as a whole and why the Board
unanimously recommend that Shareholders vote in favour of the
requisite resolutions at the General Meeting, as they intend to do
in respect of their beneficial holdings. The Circular also contains
details of the requisite Court approval process relating to the
Share Premium Reduction.
Expected Timetable of Events
Latest time and date for completion or receipt 10:00 a.m. on 25 April
of Forms of Proxy 2020
General Meeting 10:00 a.m. on 27 April
2020
Court Hearing to confirm the share premium 10:00 a.m. on 9 June
reduction 2020
Record Date 6:00 p.m. on 10 June
2020
Ordinary Shares commence trading ex-entitlement 8:00 a.m. on 11 June
to Return of Cash 2020
Registration of Court Order and Effective 11 June 2020
Date of Return of Cash
Dispatch of cheques to Shareholders or Shareholders' On or around 30 June
CREST accounts credited (as appropriate) 2020
in respect of Return of Cash entitlements
Notes
These dates (except those for the completion or receipt of Forms
of Proxy and of the General Meeting) are estimates only, being
subject to agreement of hearing dates with the Court. The timetable
assumes that the General Meeting will not be adjourned as a result
of there being no quorum, or for any other reason. If there is an
adjournment, all subsequent dates are likely to be later than those
shown. Any changes will be notified to Shareholders by an
announcement on the Regulatory News Service of the London Stock
Exchange.
All references to time in this announcement are to London
time.
Watchstone Group plc Tel: 03333 44804
WH Ireland Limited, Nominated Adviser Tel: 020 7220 1666
and broker
Chris Hardie
Lydia Zychowska
FURTHER INFORMATION
PART 1
1. Introduction
The Board today announces the process and anticipated timetable
for the payment of approximately GBP50.5 million in aggregate to
Shareholders by way of a Return of Cash.
This announcement explains the background to the Proposals and
how the Return of Cash is proposed to be effected. The effect of
the proposed Return of Cash will be that for every fully paid
Ordinary Share held at the Record Date, a Shareholder will receive
110 pence in cash. The expected date for the Return of Cash through
dispatch of cheques to Shareholders of crediting of Shareholders'
CREST accounts (as appropriate) is on or around 30 June 2020.
The purpose of this announcement is to provide you with
information about the background to, and reasons for, the Return of
Cash, to explain why the Board considers the Return of Cash is in
the best interests of the Company and the Shareholders as a whole.
Shareholders should note that, unless the Resolution is approved at
the General Meeting (and the Court approves the Share Premium
Reduction), the Share Premium Reduction and the Return of Cash will
not take place.
2. Impact of COVID-19 on the General Meeting
The evolving COVID-19 situation and the related Government
restrictions will clearly impact the ability of Shareholders to
attend the General Meeting in person. In normal circumstances, the
Board greatly values the opportunity to meet Shareholders in
person. However, it fully supports the recent Stay at Home
Measures, and takes seriously the Company's responsibility to slow
the spread of COVID-19. The Stay at Home Measures prohibit public
gatherings of more than two people. The only exceptions to this are
where the gathering is of people who live together or where the
gathering is 'essential for work purposes' (noting that workers
should try to minimise all gatherings). Attendance at a general
meeting by a shareholder (other than as specifically required to
form the quorum for that meeting) is not 'essential for work
purposes'.
On this basis, the Board intends to conduct the General Meeting
in a reasonable manner with the fewest possible participants. The
General Meeting will be convened with the minimum necessary quorum
of two Shareholders (as arranged by the Company) in order to
conduct the business of the meeting.
Therefore, in view of the Stay at Home Measures, the Board has
concluded that Shareholders will not be permitted to attend the
General Meeting in person. To do so would be inconsistent with
current Government guidance in relation to COVID-19 and the Stay at
Home Measures. Our advisers and other guests have also been asked
not to attend.
Instead of attending the General Meeting, Shareholders are
please asked to exercise their votes by submitting their proxy
electronically using www.signalshares.com, in accordance with the
procedures set out in the notes to the Notice of the General
Meeting.
Shareholders should appoint the Chair of the meeting as their
proxy. As a result of the Stay at Home Measures, if a Shareholder
appoints someone else as its proxy, that proxy will not be able to
attend the meeting in order to cast the Shareholder's vote.
The General Meeting will be purely functional in format to
comply with the relevant legal requirements. There will be no
presentations.
It is our current intention to live-stream the General Meeting
so that Shareholders will be able to follow the meeting remotely.
However, this will be kept under review and subject to the
Government guidance in place at the time of the General Meeting.
For further details of how to access the General Meeting remotely,
please email info@watchstonegroup.com. As mentioned above, the web
facility will be provided for information purposes only and
Shareholders will not be able to actively participate in the
meeting.
In addition, should a Shareholder have a question that they wish
to raise at the General Meeting, we ask that they send it by email
to info@watchstonegroup.com, to be received no later than 10.00
a.m. on 25 April 2020. We will endeavour to answer questions
received in advance, either by publishing responses on our website
following the General Meeting or at the General Meeting itself.
The situation regarding COVID-19 is evolving rapidly and the
Company is following the health advice of the UK Government and
Public Health England. Shareholders are encouraged to monitor the
Company's website for any further updates in relation to
arrangements for the General Meeting.
3. Background to and reasons for the Share Premium Reduction and the Return of Cash
The Company proposes to return excess capital to Shareholders as
the opportunities to re-invest its cash deposits are limited and
earn little or no interest. The Company believes that the working
capital to be retained by the Company following the Return of Cash
will be sufficient to fund future expenditure. The Board has also
considered the impact of the ongoing COVID-19 outbreak and has
concluded that the COVID-19 outbreak does not materially affect the
cash needs of the Company.
Further, and as detailed in Part 3 of this announcement, the
Company notes that the proposed Return of Cash involves a legal
process to be undertaken which ensures Shareholders and creditors
(including contingent creditors) of the Company are adequately
protected.
The proposed Share Premium Reduction will enable the Company to
make a Return of Cash to Shareholders of approximately GBP50.5
million in aggregate.
As at 31 March 2020, the Company had cash of GBP89.4m. Following
the Return of Cash, the Company will continue to hold its remaining
cash in major UK regulated banks.
4. The Share Premium Reduction
Under the Companies Act 2006, a company may, with the sanction
of a special resolution and the confirmation of the Court, reduce
or cancel its existing share premium. It may apply the sums
resulting from such reduction in repaying holders of the relevant
shares the amount which is reduced or cancelled. This is the
mechanism by which Shareholders holding fully paid Ordinary Shares
will receive 110 pence for each Ordinary Share which they hold upon
the Return of Cash taking place.
In seeking the Court's approval of the Share Premium Reduction
and the Return of Cash, the Court will need to be satisfied that
the interests of the creditors (including contingent creditors) of
the Company, whose debts remain outstanding on the date on which
the Court Order is registered, will not be prejudiced by the
proposed Share Premium Reduction. The Company will put in place
such arrangements as the Court considers appropriate to satisfy the
Court in this regard.
Shareholders should note that if, for any reason, the Court
declines to approve the Share Premium Reduction, then the Return of
Cash will not take place.
Further details of the proposed Share Premium Reduction can be
found in Part 3 of this announcement.
5. Taxation
For information regarding the tax position of the Proposal,
please see Part 4 of this announcement.
6. Non-United Kingdom Shareholders
Shareholders who are not resident in the United Kingdom or who
are citizens, residents or nationals of other countries should
consult their professional advisers to ascertain whether the
Proposal will be subject to any restrictions or require compliance
with any formalities imposed by the laws or regulations of, or
anybody or authority located in, the jurisdiction in which they are
resident or to which they are subject. In particular, it is the
responsibility of any Shareholder not resident in the United
Kingdom or a citizen, resident or national of another country to
satisfy himself as to full observance of the laws of each relevant
jurisdiction in connection with the Proposal, including the
obtaining of any government, exchange control or other consent
which may be required, or the compliance with other necessary
formalities needing to be observed and the payment of any issue,
transfer or other taxes or duties in such jurisdiction.
The distribution of this announcement in certain jurisdictions
may be restricted by law. Persons into whose possession this
announcement comes should inform themselves about and observe any
such restrictions.
Shareholders who are not resident in the United Kingdom should
note that they should satisfy themselves that they have fully
observed any applicable legal requirements under the laws of their
relevant jurisdiction in relation to the Share Premium Reduction or
the Return of Cash.
7. General Meeting
The Share Premium Reduction and the Return of Cash is
conditional upon, amongst other things, Shareholder approval being
obtained at the General Meeting. The General Meeting will be held
at Herbert Smith Freehills LLP, Exchange House, Primrose Street,
London, EC2A 2EG, at 10.00 a.m. on 27 April 2020, at which the
Resolution will be proposed. The Resolution to approve the Return
of Cash is a special resolution, meaning that for it to be passed
75% or more of votes cast must be in favour.
8. Recommendation
The Directors consider the Share Premium Reduction and the
Return of Cash to be in the best interests of the Company and
Shareholders as a whole. Accordingly, the Board unanimously
recommend that you vote in favour of the Resolution, as the
Directors intend to do in respect of their beneficial holdings.
The Board would like to remind you again to monitor the Company
website for any further updates in relation to the arrangements for
the General Meeting, as we are closely monitoring all developments
and the UK Government's guidance relating to COVID-19. The Board
would also like to take this opportunity to thank all Shareholders
for their continued support and understanding in these exceptional
circumstances, and wish them well during this time as we all
navigate the implications of COVID-19. We will return to full
Shareholder engagement as soon as we can.
Part 2
DEFINITIONS
The following definitions and technical terms apply throughout
this announcement, unless the context otherwise requires:
"AIM" the AIM market, being a market of that name and operated
by the London Stock Exchange;
"Board" or "Directors" the board of directors of the Company;
"CGT" taxation of chargeable gains;
"Chapter 1 ITA 2007" Chapter 1 of Part 13 of the Income Tax Act 2007;
"Court" the High Court of England and Wales;
"Court Hearing" the hearing of the Company's claim for the
confirmation by the Court of the Share Premium Reduction and the
Return of Cash;
"CTA 2010" the Corporation Tax Act 2010;
"FCA" the Financial Conduct Authority;
"Form of Proxy" the form of proxy available on www.signalshares.com;
"FRC" the Financial Reporting Council;
"General Meeting" the general meeting of the Company to be held
at Herbert Smith Freehills LLP, Exchange House, Primrose Street,
London, EC2A 2EG, at 10.00 a.m. on 27 April 2020;
"Group" the Company and its subsidiaries and subsidiary
undertakings;
"HMRC" Her Majesty's Revenue and Customs;
" Notice " the notice convening the General Meeting;
"2019 Notice of Intended Claim" a letter described as a "Notice
of intended claim" from a law firm acting for a claimant group
suggesting that it intends to commence an action against the
Company pursuant to section 90A and Schedule 10A of the Financial
Services and Markets Act 2000;
"Ordinary Shares" ordinary shares of 10 pence each in the
capital of the Company;
"Proposal" the Share Premium Reduction and the Return of
Cash;
"Record Date" record date in relation to the Share Premium
Reduction, being 6.00pm on 10 June 2020;
"Resolution" the resolution to approve the Share Premium
Reduction and the Return of Cash to be proposed at the General
Meeting;
"Return of Cash" the proposed payment of capital to Shareholders
following the proposed Share Premium Reduction;
"SFO" the Serious Fraud Office;
"SFO Investigation" an investigation by the SFO opened in August
2015 relating to past business and accounting practices at the
Company;
"Shareholders" holders of Ordinary Shares;
"Share Premium Reduction" the proposed reduction of the
Company's share premium account by GBP50.5 million;
"Stay at Home Measures" the measures passed into law in England
and Wales, with immediate effect, in statutory instruments
(2020/350 in England and 2020/353 in Wales) made pursuant to the
Public Health (Control of Disease) Act 1984; and
"Watchstone" or "Company" Watchstone Group plc.
Part 3
Further Details of the proposed Return of Cash
The Share Premium Reduction
As discussed in section 3 of Part 1 of this announcement, in
seeking the Court's approval for the Share Premium Reduction, the
Court is required to consider the protection of creditors
(including contingent creditors) of the Company, whose debts (or
contingent debts) remain outstanding on the date that the Share
Premium Reduction becomes effective, to ensure that they are
protected. Any such creditor protection may include seeking the
consent of the Company's creditors to the Share Premium Reduction
or the provision by the Company to the Court of an undertaking to
deposit a sum of money into a blocked account created for the
purpose of discharging the non-consenting creditors of the
Company.
In addition, the Court is likely to consider the potential
shareholder claims and the SFO Investigation to which the Company
is subject when considering whether to approve the Share Premium
Reduction. Details on the potential shareholder claims and the SFO
Investigation are set out below.
In view of the Court's considerations in giving its approval and
in consultation with professional advisors, the Board has
undertaken a thorough and extensive review of the Company's
liabilities (including contingent liabilities) and the potential
liabilities of the Company under the potential shareholder claims
and the SFO Investigation. The Board considers that the Company
will be able to satisfy the Court that, as at the date on which the
Court Order relating to the Share Premium Reduction becomes
effective, the Company's creditors (including contingent creditors)
will be sufficiently protected.
The Company intends that an application will be made for the
Court to approve the Share Premium Reduction promptly after the
General Meeting provided that the Resolution has been passed. It is
anticipated that the initial directions hearing in relation to the
Share Premium Reduction will take place on 20 May 2020, with the
final Court Hearing taking place on 9 June 2020 and the Share
Premium Reduction becoming effective on 11 June 2020, following the
necessary registration of the Court Order at Companies House. It is
anticipated that Shareholders will be sent cheques (or have
Shareholders' CREST accounts credited (as appropriate)) for the
proceeds of the Return of Cash on or around 30 June 2020.
SFO Investigation and potential shareholder claims
On 20 March 2014, the FRC launched a review of the 2012 report
and accounts of the Company. On 30 September 2014, the FRC extended
the scope of its review into certain aspects of the 2011 report and
accounts. On 24 June 2015, the Company announced that the FCA had
commenced an investigation in relation to the public statements
made regarding the financial accounts of the Company during 2013
and 2014. On 5 August 2015, the SFO informed the Company that it
had opened an investigation relating to business and accounting
practices at the Company. On the same date, the FRC advised the
Company that, in light of the positive actions taken by the
Directors in correcting the identified errors, amending accounting
policies and providing their undertakings, the FRC had closed its
review of the 2011 and 2012 report and accounts. On 18 August 2015,
the FCA announced that, in light of the above investigation by the
SFO it had decided to discontinue its own investigation with
immediate effect. Accordingly, the Company continues to co-operate
fully with the SFO Investigation which, as far as the Directors are
aware, is the only ongoing investigation to which the Company is
subject. It is not possible to determine whether the SFO will, in
due course, seek to pursue a prosecution of the Company and/or any
individuals, or whether the SFO will seek a resolution of its
investigation which does not involve a prosecution. Further, it is
not possible to determine whether any such prosecution (if pursued)
would be successful, or what the quantum of any fine or
confiscation imposed as a result of a successful prosecution might
be (since this would depend on the charges that are ultimately
brought, if any).
In addition, the Company announced on 29 September 2015 that it
had received a letter described as a "Notice of Intended Claim"
from a law firm acting for a claimant group suggesting that its
clients intend to commence an action against the Company under the
Financial Services and Markets Act 2000. The Company understands
that this putative action was abandoned some time ago although the
law firm did not inform the Company.
On 26 November 2019, another law firm purporting to act for a
group of twelve individuals (together, the "Prospective
Claimants"), some of whom had participated in the original
threatened litigation detailed above, sent a "Notice of intended
claim" to the Company ("2019 Notice of Intended Claim"). The 2019
Notice of Intended Claim notified the Company of the Prospective
Claimants' intention to pursue a claim under section 90A and
Schedule 10A of the Financial Services and Markets Act 2000.
The Company responded fully to this 2019 Notice of Intended
Claim, outlining its view that the claim had no legal merit,
because the legal tests for bringing a claim of this sort were not
satisfied. For that reason, the Company has not, at this pre-action
stage, investigated the factual assertions underlying the 2019
Notice of Intended Claim. Furthermore, the 2019 Notice of Intended
Claim did not include an estimate of the value the Prospective
Claimants' claims against the Company. Accordingly, the Company has
sought to and taken advice to calculate the maximum total claim
value, were the Prospective Claimants to succeed on every point. To
the extent it has been possible to review the trading histories of
each of the twelve Prospective Claimants (using the share ownership
records of the Company), the Company considers that their total
aggregate potential losses, should they succeed on every aspect of
their claim, would not exceed GBP1m (not including any
consequential losses or legal costs, if awarded). There can be no
guarantee that other claimants will not also bring claims against
the Company, or that the Prospective Claimants do not own other
shares indirectly. The Company is not aware, and has not been made
aware, of any other law firms acting for (or in the process of
forming) other claimant groups, or of any such indirect
shareholdings.
Whilst the Company will vigorously defend all such claims, as
appropriate, the Company expects that it would (following the
Return of Cash) have sufficient assets to cover a successful action
brought pursuant to the 2019 Notice of Intended Claim, based on the
estimations of the maximum potential losses for which the
Prospective Claimants could claim.
part 4
Taxation
The following comments are intended as a general guide only and
are based on current UK legislation and HMRC practice as at the
date of this announcement. These comments deal only with
Shareholders who are resident or ordinarily resident for taxation
purposes in the United Kingdom, who are the absolute beneficial
owners of fully paid Ordinary Shares and who hold them as an
investment. They do not deal with the position of certain classes
of Shareholders, such as dealers in securities, persons holding
unpaid Ordinary Shares, or persons regarded as having obtained
their Ordinary Shares by reason of employment. Therefore, any such
Shareholders are advised to satisfy themselves as to the tax
consequences for them of their ownership of Ordinary Shares in the
Company.
Return of Cash
Subject to the comments below, and obtaining HMRC clearance, we
would expect the Return of Cash to qualify as a repayment of
capital on the Ordinary Shares under section 1000(1)(B)(a) of the
CTA 2010 and therefore would not expect any part of the proceeds
received by a Shareholder on the Return of Cash to be an income
distribution in the Shareholder's hands.
Part 15 CTA 2010 and Chapter 1 ITA 2007 are anti-avoidance
provisions which might be applied to the Return of Cash so as to
treat all or part of the receipt as income in the hands of
Shareholders within the charge to UK corporation tax and within the
charge to income tax respectively. The Company would not expect
Part 15 CTA 2010 or Chapter 1 ITA 2007 to apply.
The Company has applied for clearance from HMRC under the
sections above.
The Return of Cash on cancellation may give rise to a liability
to CGT depending on the Shareholder's individual circumstances
(including the availability of exemptions, reliefs or allowable
losses).
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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