Dominic Coyleanswers your questions.
Treasured shares
Could you please outline the significance of buyback of shares in companies such as Independent News & Media "which will be held in treasury", as opposed to shares bought back and cancelled, in terms of:
a)ownership of company
b)effect on eps
c)future of those shares.
Mr D.MacI., e-mail
Treasury shares held by companies are governed by the provisions of the Companies Act 1990, most particularly section 209.
Essentially, when a company buys back stock in the open market from its shareholders under resolutions agreed previously at an annual or extraordinary general meeting, it has two choices. Either it can cancel the shares, or it can hold them as treasury shares.
In the case of treasury shares, it is open to the company to reissue the stock at some later stage.
In the case of Independent News & Media (IN&M), the company has stated that the reason for its share buyback was to meet impending obligations to investors who acquired cumulative exchangeable preference shares in the group in New Zealand.
About 56 million of these preference shares are currently in issue.
On November 30th, holders of the stock will be entitled to exchange them for ordinary shares in IN&M on a one-for-one basis at the prevailing share price on that day.
If IN&M did not buy back some of its shares and hold them in treasury, it would face the prospect of having to issue up to 56 million new shares at the end of November - a move that would dilute the holdings of existing shareholders by more than 7 per cent.
Returning to your other two specific questions, treasury shares are deemed to be held in the name of the company. However, they cannot be used by the company to vote on any matter while they are held in treasury, and the company, as owner, is not entitled to receive any dividend on stock held in treasury.
There are also rules governing how much of a company's stock can be held in treasury. Under the Companies Act, no group can hold treasury shares with a nominal value of more than 10 per cent of the "nominal value of the issued share capital" of the company. When assessing this 10 per cent limit, shares in the company held by subsidiaries or held by individuals in their own name but on the company's behalf are included.
On the issue of earnings per share (eps), a common measure of company performance, treasury shares are not taken into account when assessing eps, although it would be a poorly run company that would instigate a share buyback and hold the stock in treasury just to boost eps.
Storage facilities indeed
You mentioned some time ago that a storage company was looking into the feasibility of providing a facility for storage of valuables such as house deeds, since some of the banks no longer provide this service.
Have you any news for those lucky people who now have deeds to worry about?
Ms C.B., e-mail
Once your mortgage is paid off, the title deeds are no longer required by your lender as security against the mortgage loan. Many of the banks do provide a storage facility at a fairly nominal charge.
Most of the companies providing such storage solutions are, to the best of my knowledge, targeted mainly at the commercial market.
If your lender is not in a position to provide document storage, there is at least one Irish group providing such a service. Filestores is a subsidiary of Document Management Group (DMG) Services. It specialises in off-site storage of documents for companies and shredding of confidential corporate material.
However, it recently announced that it was extending its operations to provide document storage to consumers. The company offers five- and 10-year contracts for a one-off fee.
Documents can recovered from the company at any stage, although you will need to apply in writing and pay a recorded delivery fee.
Apparently, the group allows additional documents to be lodged to your file, though you will pay a further fee for that service.
I'm sure there are other similar providers around.
• Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by e-mail to dcoyle@irish-times.ie.
This column is a reader service and is not intended to to replace professional advice. Due to the volume of mail, there may be a delay in answering queries. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.
