Disposing of overseas shares

Stoodles

Some time in 1990s or before my late father bought shares in two companies then based in Hong Kong. Now both my parents have died I'm trying to sort them out. Initially I just need a value for probate, but ultimately I probably want to dispose of them.


One is still listed in Hong Kong, so I've established the 252 shares are worth about £31 in total. They yield about £1.20pa which arrives as two cheque in HK$ and would cost more than that to pay in. I'd really like to be rid of these, but the share certificates are missing and it would cost £60 to replace. Is it possible simply to walk away from these?



The other consists of 52 shares, and I have some, but not all, share certificates. It isn't listed, so I'm not sure if I've calculated the probate value correctly. From the 2019 Balance Sheet, the NAV is shown as US$28.95 so I've multiplied that up and converted to £1205.This one pays about £125pa, so if my sums are right it is doing well. Even so, I think I'd rather dispose of it, to avoid having to declare overseas income on a Tax Return. Does that sound sensible?

bowlhead99

Stoodles wrote: »

One is still listed in Hong Kong, so I've established the 252 shares are worth about £31 in total. They yield about £1.20pa which arrives as two cheque in HK$ and would cost more than that to pay in. I'd really like to be rid of these, but the share certificates are missing and it would cost £60 to replace. Is it possible simply to walk away from these?

There are charities such as sharegift who accept donations of shares but transferring foreign shares to them can be problematic, and if it would cost you an indemnity fee to assert your rights over the shares and obtain new certificates or transfer the share ownership, it seems better to just 'walk away'.

A share in a limited company gives you ownership rights but with limited liability. As an owner of the shares your liability is limited to the money already paid to the company. They can't demand you pay any money or take any actions (voting, attending meetings etc). So feel free to just ignore any communications.

The other consists of 52 shares, and I have some, but not all, share certificates. It isn't listed, so I'm not sure if I've calculated the probate value correctly. From the 2019 Balance Sheet, the NAV is shown as US$28.95 so I've multiplied that up and converted to £1205.This one pays about £125pa, so if my sums are right it is doing well.

Valuing an unquoted company can be a complex process. As a minority shareholder you don't personally own or have any control over its actual assets and liabilities; so the £1205 of assets are not yours. What you own is a right to vote on certain events, receive dividends if they choose to pay any, and receive cash or other assets if the company were to be wound up and has any available.

So, the fair value of your shares is what someone would pay you to take over those rights, which could be quite different from £1205. They may look at other comparable companies which *are* listed on an exchange and see that investors are valuing them at, say, 20-25x annual profits, or 1.7-2.1x net assets, or some other metric, and use that as a starting point for considering what they would pay to buy the company or a share of the company.

It is rare for any listed company to be valued at less than 10x the annual dividends unless the dividend is unsustainable. It would represent a yield of over 10%. So, the fair value of those shares in the company in an arms-length sale to an independent third party would probably be more than £1205. Although having shares in a company which is not traded in a stock exchange is not very attractive as you have limited rights to information, no practical control over what the owners and directors do with the company, and no obvious exit route. So you may struggle to sell them for as much as £1205 to anyone who is not an insider or majority owner, if at all.

Having said that - for probate if the NAV is only £1k or so , HMRC may not query it. If you're able to sell the shares in a private transaction for a significantly different figure which indicates the £1k was woefully inaccurate, you can adjust the value for IHT purposes.

Even so, I think I'd rather dispose of it, to avoid having to declare overseas income on a Tax Return. Does that sound sensible?

(a) How do you propose to dispose of the shares if shares in the company are not traded on any stock exchange? You could write to the company and ask if there is any facility for a small shareholder to be bought out by whoever owns most of the shares - but you may not have any general right to demand that anyone purchases them from you.

(b) If you only have £125 of dividends from overseas shares, you can just put them in the same box of a tax return that you put dividends from UK shares - no need to fill out the foreign pages.

Stoodles

Thank you for that comprehensive answer! It looks as if I can safely continue with the values I have for probate purposes.

bowlhead99 wrote: »

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(a) How do you propose to dispose of the shares if shares in the company are not traded on any stock exchange? I'm waiting for a copy of a letter to shareholders regarding the sale or transfer of these shares, which I'm told has previously been sent out.

(b) If you only have £125 of dividends from overseas shares, you can just put them in the same box of a tax return that you put dividends from UK shares - no need to fill out the foreign pages. I hadn't realised that. My mother had other foreign income from a share portfolio I won't be replicating, so her accountant completed those pages anyway. In that light, I might simply transfer the ownership rather than selling.