TIDMWTG
RNS Number : 2918O
Watchstone Group PLC
29 May 2020
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF ARTICLE 7 OF EU REGULATION 596/2014.
Watchstone Group plc
( " Watchstone " or the "Company")
Report and Accounts for the year ended 31 December 2019 AND
NOTICE OF ANNUAL GENERAL MEETING
PROPOSED FURTHER SHARE PREMIUM REDUCTION AND RETURN OF CASH
Watchstone Group plc (LON:WTG) announces today that it has
published its Annual Report and Accounts for the year ended 31
December 2019 on the Group's website at
www.watchstonegroup.com/investors .
The Company has also published a notice of the 2020 Annual
General Meeting ("AGM") and an explanatory circular for
shareholders of the Company ("Notice of AGM") inviting shareholders
to approve resolutions including those to authorise a proposed
further reduction of the Company's share premium account ("Second
Share Premium Reduction") and a proposed return of cash to
shareholders ("Second Return of Cash").
The AGM will be held at 1.00 pm on 24 June 2020 at Herbert Smith
Freehills LLP, Exchange House, Primrose Street, London, EC2A 2EG.
The Annual Report and Accounts for the year ended 31 December 2019
and the Notice of AGM have been posted to registered shareholders
who have so elected.
The Second Share Premium Reduction and Second Return of Cash is
in addition to the share premium reduction and return of cash
announced on 9 April 2020 and subsequently approved by shareholders
on 27 April 2020 ("First Return"). The Court hearing to confirm the
First Return will take place on 9 June 2020 and, if so approved,
the First Return will be completed on or around 30 June 2020.
-- The proposed Second Return of Cash to shareholders in July
2020 will be approximately GBP18.4m million in aggregate subject to
shareholder and Court approval.
-- The effect of the proposed Second Share Premium Reduction and
Second Return of Cash will be that for every fully paid ordinary
share of 10 pence each held at the relevant Record Date (as defined
in the Notice of AGM), a shareholder will receive 40 pence in
cash.
-- If approved by shareholders and the Court, trading in
Ordinary Shares ex-entitlement to the Second Return of Cash is
expected to commence on 23 July 2020 with the expected dispatch of
cheques to shareholders or crediting of shareholders' CREST
accounts (as appropriate) in respect of Second Return of Cash
entitlements, on or around 31 July 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 AGM in
person. Details of how shareholders can access the AGM 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 24 June 2020. The impact of COVID-19 on the AGM is
explained further below.
The Notice of AGM has also been made available on the Company's
website at www.watchstonegroup.com .
The Notice of AGM provides shareholders with information about
the background to, and reasons for, each of the Second Share
Premium Reduction and the Second 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 AGM, as they intend to
do in respect of their beneficial holdings. The Notice of AGM also
contains details of the requisite Court approval process relating
to the Second Share Premium Reduction.
Expected Timetable of Events
Latest time and date for completion or receipt 1.00 p.m. on 22 June
of Forms of Proxy 2020
Annual General Meeting 1.00 p.m. on 24 June
2020
Court Hearing to confirm the Second Share 21 July 2020
Premium Reduction
Record Date relating to the Second Return 22 July 2020
of Cash
Ordinary Shares commence trading ex-entitlement 8.00 a.m. on 23 July
to the Second Return of Cash 2020
Registration of Court Order and Effective 23 July 2020
Date of the Second Return of Cash
Dispatch of cheques to shareholders or shareholders' On or around 31 July
CREST accounts credited (as appropriate) 2020
in respect of the Second Return of Cash
entitlements
Notes
These dates (except those for the completion or receipt of Forms
of Proxy and of the AGM) are estimates only, being subject to
agreement of hearing dates with the Court. The timetable assumes
that the AGM 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 GBP18.4 million in aggregate to
shareholders by way of the Second Return of Cash.
This announcement explains the background to the proposals and
how the Second Return of Cash is proposed to be effected. The
effect of the proposed Second Return of Cash will be that for every
fully paid Ordinary Share held at the relevant Record Date, a
shareholder will receive 40 pence in cash. The expected date for
the Second Return of Cash through dispatch of cheques to
shareholders or crediting of shareholders' CREST accounts (as
appropriate) is on or around 31 July 2020.
The purpose of this announcement is to provide you with
information about the background to, and reasons for, the Second
Return of Cash, to explain why the Board considers the Second
Return of Cash is in the best interests of the Company and the
shareholders as a whole. Shareholders should note that, unless the
relevant resolution is approved at the AGM (and the Court approves
the Second Share Premium Reduction), the Second Share Premium
Reduction and the Second Return of Cash will not take place.
2. Impact of COVID-19 on the AGM
In view of the UK Government placing restrictions on travel and
other matters because of the COVID-19 situation, shareholders will
not be permitted to attend the AGM in person. Details of how
shareholders can access the AGM 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.
The evolving COVID-19 situation and the related Government
restrictions will clearly impact the ability of shareholders to
attend the AGM 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 AGM in a
reasonable manner with the fewest possible participants. The AGM
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 AGM
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 AGM, 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 AGM.
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 AGM 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 AGM 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 AGM. For further details of
how to access the AGM 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 AGM, we ask that they send it by email to
info@watchstonegroup.com , to be received no later than 10.00 a.m.
on 24 June 2020. We will endeavour to answer questions received in
advance, either by publishing responses on our website following
the AGM or at the AGM itself.
3. Background to and reasons for the Second Share Premium
Reduction and the Second 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. In addition to the ordinary business of
this year's AGM, and following the general meeting on 27 April 2020
in which shareholders approved the First Return, a further share
premium deduction and return of cash is now proposed.
The effect of the proposed Second Share Premium Reduction and
Second Return of Cash will be that for every fully paid Ordinary
Share held at the relevant Record Date, a shareholder will receive
40 pence in cash. The Second Share Premium Reduction and the Second
Return of Cash is conditional upon, amongst other things,
shareholder approval being obtained at the AGM. The resolution
proposing the Second Share Premium Reduction and Second Return of
Cash, is a special resolution, meaning that for it to be passed 75%
or more of the votes must be cast in favour.
The Company believes that the working capital to be retained by
the Company following the Second Return of Cash will be sufficient
to fund future expenditure. In respect of the First Return, the
Company had maintained a GBP20 million cash 'buffer' for any
penalties or fines arising from the SFO investigation. In light of
the SFO informing the Company on 27 April 2020 that it would not be
subject to criminal prosecution in respect of those matters which
are the subject of the SFO Investigation, maintaining the GBP20
million cash buffer is no longer considered necessary by the Board.
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.
The proposed Second Share Premium Reduction will enable the
Company to make the Second Return of Cash to shareholders of
approximately GBP18.4 million in aggregate. As at 30 April 2020,
the Company had cash of GBP89.0 million. Following the Second
Return of Cash, the Company will continue to hold its remaining
cash in major UK regulated banks.
Further, and as detailed in Part 3 of this announcement, the
Company notes that the proposed Second Return of Cash involves a
legal process to be undertaken which ensures shareholders and
creditors (including contingent creditors) of the Company are
adequately protected.
4. The Second 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 40 pence for each Ordinary Share which they hold upon
the Second Return of Cash taking place.
In seeking the Court's approval of the Second Share Premium
Reduction and the Second 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 Second 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 Second Share Premium Reduction, then the
Second Return of Cash will not take place.
Further details of the proposed Second Share Premium Reduction
can be found in Part 3 of this announcement.
5. Taxation
For information regarding the tax position of the proposed
Second Share Premium Reduction, 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 Second
Return of Cash 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 proposed Second Share Premium
Reduction , 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 Second Share Premium
Reduction or the Second Return of Cash.
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;
"Annual General Meeting" or "AGM" the annual general meeting of
the Company to be held at Herbert Smith Freehills LLP, Exchange
House, Primrose Street, London, EC2A 2EG, at 1.00 p.m. on 24 June
2020;
"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 Second Share Premium Reduction and
the Second Return of Cash;
"CTA 2010" the Corporation Tax Act 2010;
"First Return" the ongoing reduction of the Company's share
premium account by GBP50.6 million and subsequent payment to
shareholders pro rata to their shareholding;
"Form of Proxy" the form of proxy available on www.signalshares.com;
"Group" the Company and its subsidiaries and subsidiary
undertakings;
"HMRC" Her Majesty's Revenue and Customs;
"Notice" the notice convening the AGM;
"Ordinary Shares" ordinary shares of 10 pence each in the
capital of the Company;
"Record Date" record date in relation to the Second Share
Premium Reduction, being 6.00pm on the 22 July 2020;
"Second Share Premium Reduction" the proposed reduction of the
Company's share premium account by GBP18,370,268.40;
"Second Return of Cash" the proposed payment to shareholders pro
rata to their shareholding following the proposed Second Share
Premium Reduction;
"SFO" the Serious Fraud Office;
"SFO Investigation" an investigation by the SFO opened in August
2015 and closed in April 2020 relating to past business and
accounting practices at the Company;
"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 SECOND Return of
Cash
The Second Share Premium Reduction
In seeking the Court's approval for the Second 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
Second 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 Second 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 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. 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 Second 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 Second Share Premium Reduction promptly after
the AGM provided that the relevant resolution has been passed.
The First Return
As discussed above, the First Return is currently on going. The
directions hearing in respect of the First Return took place on 20
May 2020, at which the Court was satisfied that there was no real
likelihood that the First Return would result in the Company being
unable to discharge its debts or the claims of its creditors as
they fell due. The final hearing in respect of the First Return is
scheduled for 9 June 2020, after which, subject to approval from
the Court, the Company shall return GBP1.10 per issued share to
relevant shareholders on or around 30 June 2020.
SFO Update
On 28 April 2020, the Company announced that it had been
informed by the SFO that it will not be prosecuted for criminal
offences in respect of those matters which were the subject of the
SFO's investigation into the Company. Therefore, the Board no
longer considers it necessary to maintain the GBP20 million cash
buffer for any penalties or fines arising from the SFO
investigation.
Expected Timetable of Events
Latest time and date for completion or receipt 1.00 p.m. on 22
of Forms of Proxy June 2020
Annual General Meeting 1.00 p.m. on 24
June 2020
Court Hearing to confirm the Second Share 21 July 2020
Premium Reduction
Record Date relating to the Second Return 22 July 2020
of Cash
Ordinary Shares commence trading ex-entitlement 8.00 a.m. on 23
to Second Return of Cash July 2020
Registration of Court Order and Effective 23 July 2020
Date of Second Return of Cash
Dispatch of cheques to shareholders or shareholders' On or around 31
CREST accounts credited (as appropriate) July 2020
in respect of Second Return of Cash entitlements
These dates (except those for the completion or receipt of Forms
of Proxy and of the AGM) are estimates only, being subject to
agreement of hearing dates with the Court. The timetable assumes
that the AGM 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.
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.
Second Return of Cash
Subject to the comments below, and obtaining HMRC clearance, we
would expect the Second 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 Second 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 Second 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 Second 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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