Sainsbury's 'B' Share Cert

cloud_dog

Hi

I have come across a share certificate in my mums name for:

J Sainsbury PLC
B Share Certificate
Redeemable Non-Cumulative Preference Shares of 35p each.

What I am hoping someone can assist me with is whether my mum was likely to have received the 35p per share capital repayment, or whether this certificate entitles her to sell and received the 35pps?

This payment relates to Sainsbury disposing of their holding in their US adventure in 2004, returning 35pps and a share consolidation. There is also this FAQ page which offers some further insight.

Unfortunately, I am non the wiser if my mum would have actually received the payment or not, and am wondering why this B Share Cert is hanging around.

If I were to hedge my bet I would think my mum would have simply selected option 1:

Alternative 1: Initial B Share Dividend (taxed as income)
You can elect to receive a single dividend of 35 pence per B Share. If you choose to do this, it
is expected that you will be sent a cheque for your dividend on 26 July 2004; or

Obviously, I could contact the registrars (Comupershare) but I'd have to do it via letter as verbal communications are not easy.

I just do not understand why there is this B Share certificate?

EDIT: She has a share cert for the consolidated Sainsbury PLC shares.

bowlhead99

cloud_dog wrote: »

What I am hoping someone can assist me with is whether my mum was likely to have received the 35p per share capital repayment,

Yes, almost certainly

or whether this certificate entitles her to sell and received the 35pps?

Not any more.

The certificate shows that she was allocated that number of B shares on that date as part of the 35p /share payout process.

They created a new B class of shares specifically to allow investors to take out there money in the most tax efficient method possible (though some investors will have been indifferent between the choices, depending on their personal tax position)

The choices for the recipients of B shares were:

1) be paid a cash dividend of 35p per B share, following which, your B shares become designated as 'Deferred Shares' with no rights to share in the future business profits or get any more money from these shares.

2) instead, redeem the shares for a cash amount of 35p per B share. Following which you no longer own the shares and so will have no rights to share in the future business profits or get any more money from these B shares.

Both give you 35p, the difference is that (1) is income (may need to pay tax on the dividend income, depending on your personal position) and (2) is a return of capital (may need to pay capital gains tax, depending on your tax position).

If for some reason she chose nothing, by refusing to fill in and return the forms and not take the cash that was being offered to her, then she would fall into a third option; where, like (2), you don't get the 35p cash dividend and instead you just hold onto them with the ability to redeem them for 35p at 6-monthly intervals over the next three years. And if she never got around to it in those three years the company will just redeem them for her whether she likes it or not, and send her the 35p per share in July 2007.

A minor difference between (3) and (2) is that with (3) you aren't taking the cash immediately, maybe spread over a year or two later to help you with your tax position... which lets Sainsbury's keep its 35p in its own bank account for the period you don't cash in the 35p - so you will receive a little dividend on the 35p equivalent to some fraction of LIBOR.

The rights attaching to the B shares are in the FAQ and Articles Of Association from July 2004 (which you can get from Companies House)

Unfortunately, I am non the wiser if my mum would have actually received the payment or not

Well, we weren't there either...

But if she had not received the payment you might expect her to have followed it up.

and am wondering why this B Share Cert is hanging around.

If she did as you assumed and just asked for the 35p immediate cash dividend they would have not needed her B certificate back, as they were only going to convert the now-worthless B share into a deferred share with no rights to participate in the company. They can update the share register at their end.

If they compulsorily redeemed it after the maximum waiting time had expired in 2007 then similarly they do not really need it back because it is worthless after the date that all B shares have been redeemed in July 2007. They would just send her the cash, assuming she hadn't changed address without telling them.

If I were to hedge my bet I would think my mum would have simply selected option 1:

Obviously, I could contact the registrars (Comupershare) but I'd have to do it via letter as verbal communications are not easy.

If time isn't of the essence it is often better to get definitive answers from registrars about holdings by letter rather than phonecall, whether or not verbal comms are easy.

Of course as it's not your holding you will have to explain in what capacity you're requesting the info. Generally it is only worth wasting your time and theirs on wild goose chase for a 15-years-old transaction if you have some decent reason to know or suspect that for some reason they failed to pay your mother. I can't see that's the case here.

15 years ago was she of unsound mind, such that when they sent her a communication saying she was going to get 35p per share of dividend cash or redemption cash, her choice, she didn't then wonder why the cheque never arrived?

My guess would be that she received and spent the money.

I just do not understand why there is this B Share certificate?

Effectively the way they enable a flexible return of money to shareholders (ie 35p of income or capital, your choice) is by breaking off 35p per share from the rest of the assets of the business and putting it in a separate class of B shares -giving the owners of that pool of cash the choice how to get it into their hands while the Ordinary shares representing the rest of the Sainsbury business just get on with the life of being a supermarket.

So, she got these B shares and had the choice to request to be paid a one off 35p dividend from them (after which the paper becomes worthless); or sell them to Sainsbury for 35p (after which the paper becomes worthless); or be oblivious and have Sainsbury automatically redeem them for 35p (after which the paper becomes worthless). All of those options on the paperwork you found online would result in your mum getting paid, over a decade ago.

EDIT: She has a share cert for the consolidated Sainsbury PLC shares.

If she didn't sell them, that's to be expected.

However, as far as B shares go, the share class doesn't exist any more; they were all automatically redeemed for cash if they weren't redeemed earlier or converted to worthless Deferred Shares

cloud_dog

Thanks for your in depth thoughts. Appreciate it.