Breach of UK Companies Acts requirements in respect of historic dividend payments

Hargreaves Lansdown plc – Half year report – 31 December 2016

Industry: financial services

Interim Management Report (extract)

Dividend

The Board has declared an interim dividend of 8.60 pence per share (H1 2016: 7.8p). The interim dividend will be paid on 30 March 2017 to all shareholders on the register at 10 March 2017. This amounts to a total interim dividend of £40.7 million.

An arrangement exists under which the Hargreaves Lansdown Employee Benefit Trusts (the “EBTs”) have agreed to waive all dividends. As at 31 December 2016 the EBTs held 1,540,551 shares.

During the period the Board became aware of a technical issue in respect of a number of historic dividends paid by the Company. Details are included in Note 11 to the condensed consolidated financial statements. A circular will be sent to shareholders shortly and will be available on the Company’s website at www.hl.co.uk/investor-relations.

  1. Dividends paid (extract)

Breach of Companies Acts requirements in respect of historic dividend payments – circular to shareholders

The Board has become aware of a technical issue in respect of the payment of a number of historic dividends paid by the Company.

The Company has always filed its statutory annual accounts on time in accordance with the requirements of the Companies Act 2006 (and before that, the Companies Act 1985) (the “Acts”), and at all times had sufficient profits and other distributable reserves to justify the payment of dividends.

However, the Company has not satisfied certain procedural requirements of the Acts before paying certain of the dividends in the years since the Company’s IPO (the “Relevant Distributions”). These procedural requirements relate to the failure to file interim accounts at Companies House which justified the payment of interim dividends or the payment of final dividends before the circulation to members of the audited accounts of the Company in respect of the relevant financial year.

The Company has been advised that, as a consequence of the above distributions being made otherwise than in accordance with the Acts, it may have claims against past and present shareholders who were recipients of the Relevant Distributions and against those persons who were directors of the Company at the time of the Relevant Distributions.

The Company wishes to put all potentially affected parties so far as possible in the position in which they were always intended to be had the Relevant Distributions been made in accordance with the procedural requirements of the Acts.

Accordingly, the Company intends to convene a general meeting at which a resolution will be proposed, which will, if passed, give the Board authority to enter into deeds of release to discharge these parties from any obligation to repay any amount to the Company in connection with the Relevant Distributions.

The entry by the Company into the Shareholders’ Deed of Release constitutes a related party transaction (as defined in the Listing Rules). This is because Peter Hargreaves and Stephen Lansdown, who each hold more than 10% of the Company’s voting rights and are therefore deemed to be related parties under the Listing Rules, will be released from any liability to repay any amounts of the Relevant Distributions received by them, in the same manner as other shareholders. In addition, the entry by the Company into the Directors’ Deed of Release will also constitute a related party transaction with respect to the Directors. Therefore, the resolution to be proposed will also seek the specific approval of the Company’s shareholders for the entry into each of the Shareholders’ Deed of Release and the Directors’ Deed of Release as a related party transaction, in accordance with the requirements of the Listing Rules.

The proposed ratification of the Relevant Distributions, and the entry by the Company into the Shareholders’ Deed of Release and Directors’ Deed of Release will not have any effect on the Company’s financial position.

A circular to shareholders to convene the general meeting and giving more information about the Relevant Distributions will be sent to shareholders shortly.

 

 

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