RSS feedsCompanies are being encouraged to track down the rightful owners of billions of pounds in unclaimed shares as the government signals that it wants to transfer such assets to occupational pension schemes.
The Pensions (Unclaimed Assets) Bill a private member’s bill introduced by Labour MP Frank Field was included by prime minister Gordon Brown in the latest list of the government’s proposed legislation. It will mean that under the auspices of a new body, the Unclaimed Assets Agency, companies will have to transfer assets that have not been claimed after 15 years to members of occupational pension schemes, typically those qualifying for assistance under the government’s Financial Assistance Scheme, which offers support to members of under-funded or collapsed company pension schemes.
However, there is still a provision that the original owners will be able to reclaim their assets if they manage to track them down at a later date. The government intends to set up the agency within 12 months.
Currently, a company can take back unclaimed dividends after 12 years, though most do not. It is estimated that, on average, between 2% and 5% of a company’s shareholders have either moved from the address to which the company sends correspondence, or are dead.
Attention has mainly been focused on financial services firms that have demutualised over the past ten years and whose shareholders have neglected to pick up what is rightfully theirs. Nearly £1bn in windfall shares belonging to more than half a million people remain unclaimed.
Time to claim
For example, Scottish Life demutualised in 2001 and has issued a final call to around 15,000 former members who have yet to claim around £7.5m, with the minimum payout worth at least £500. Standard Life has 222,000 ex-members who have yet to claim 83 million shares worth a total of around £261m, amounting to 4.2% of the company. Under company law, investors owning the unclaimed shares a re also entitled to claim dividends, and bonus shares which were due this July. The insurer says that “it is neither in the best interests of the individuals concerned, or the company, for these assets to be lying in trust.”
Friends Provident demutualised in July 2001, but still has an estimated 140,000 policyholders who have yet to make a claim for windfalls worth an average of £1,200. Unclaimed shares were converted to cash in 2004 and held for future claimants. Scottish Widows has more than 59,000 untraced members entitled to unclaimed compensation totalling £153m following the company’s acquisition by Lloyds TSB in March 2000. Halifax still has unclaimed windfalls worth £158m from its demutualisation in 1997 and estimates that 75,000 former members have yet to come forward. The bank sold the unclaimed shares in 2001 and put the proceeds, plus unclaimed dividends, in a no-interest account where former members have until 30 August 2010 to claim them.
Les Clarke, managing director at Assets Reunited, a firm that conducts searches to match people with their shareholdings, says that the need to find shareholders who have not claimed their assets is being driven by an increased focus on corporate governance. “Companies are beginning to ask whether it is good corporate governance to have millions of shares lying dormant because no one has checked whether the shareholders are still alive or are even aware of their existence,” says Clarke.
“Not bothering to track the owners of unclaimed assets appears lazy or complacent and companies cannot afford to look as if they are complacent about good corporate governance,” he says. Furthermore, sending out company reports and other correspondence to tens of thousands of people who may have moved or are dead can also be an expensive waste of time, he adds.
Another pressing reason to reunite shareholders with their assets is the
increased threat of identity fraud. As letters are sent out to shareholders
whose details have not been checked for some time, the system is open to abuse,
says Clarke.
“It is not very difficult for someone to assume the identity of a shareholder if
correspondence is intercepted,” says Clarke. “Fraudsters will have access to
personal details and a lot of financial information and besides, not all
companies are going to carry out thorough checks to confirm their identities,”
he says.
Voting power
Companies have an important strategic reason for relocating lost shareholders
they need their votes. According to Clarke, some companies have realised the
benefits of tapping into the support of private investors to help push through
contentious corporate policies, such as fending off hostile takeover bids and
backing potential mergers.
Clarke points out that Marks & Spencer was able to fend off tycoon Philip Green’s takeover bid in part by garnering together the support of individual shareholders who might not normally have voted at annual or extraordinary general meetings. Barclays, however, has not been so lucky in its pursuit of dormant shareholders to back its acquisition of ABN Amro, he says.
“There have been some recent high profile acquisition targets that have been made or broken on the back of private investor support or lack of it,” says Clarke. “Also, companies acquiring target firms do not want to see such large liabilities on the accounts.”
