In this month's legal review, Gateley LLP experts review government plans to change the rules on B share schemes to reduce dividend advantages, issues of director authority in the Bass Jarrington v RBS case, plus the latest consultations on legal requirements for audit tendering for listed companies
Cash returns: no more plan B
When a company has built up significant reserves for which it has no immediate need, it may decide to return that cash to its shareholders. There are various different ways in which this could be effected, from a simple cash dividend to a share buyback, capital reduction or scheme of arrangement.
In recent years, large public companies have often looked to structure substantial returns via a ‘B share scheme’ in order to give their shareholders flexibility over how they receive the return.
The approach involved the creation of a new class of B shares, issued by way of a bonus issue to existing shareholders. The shareholders could then choose whether to receive a return in respect of those B shares in the form of either income (via a dividend) or capital (via a redemption or buyback of shares).
