I discovered today that, this morning, shareholders in Tesco PLC voted to receive a special dividend of 50.93 p a share, the funding of which arises from Tesco’s sale of its businesses in Thailand and Malaysia.
Payment of the special dividend will be accompanied by a re-organisation of its share capital to maintain the value of the individual shares.
For every 19 shares held as at 6 pm on Friday, 12 February 2021, shareholders will receive 15 of the new shares and a special dividend amounting to £9.67 (and so on, in proportion). Whilst it is intended that the price of an individual share will not significantly change, once the scheme is effective on 15 February 2021 shareholders will hold 21% less shares in Tesco than they do today – the difference having been converted into the special dividend.
Notwithstanding that the payment of the special dividend will impact the capital of any trust holding Tesco shares, the dividend will be income in the trustees’ hands and payable to the life tenant or subject to the trustee dividend rate of tax, whatever the terms of the trust instrument effectively require.
It is disappointing that the impact that such schemes can have on trusts is rarely reviewed by companies when considering how they can “return value” to their shareholders.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals