Shareholder endorsement will see LIC introduce changes to its Constitution
with effect from 1 July 2008.
The changes mean
- It will not be compulsory for farmer users of LIC products and
services to hold Investment Shares.
- New Entrants to the industry no longer have to buy a minimum number
of Investment Shares.
- Acquisition of Investment Shares will be easier with the
establishment of a Voluntary Investment Scheme. All Co-operative Control
shareholders will have the ability to join the Scheme which will acquire
Investment Shares on market.
- The previous ratios for holdings of Investment Shares (30 Investment
Shares to each Co-Operative Control share held) no longer apply.
Shareholders will be able to choose the number of shares - up to a maximum of
5% (i.e. 1,476,430) of Investment Shares on issue. The 5% cap is cumulative
over all the farmer''s business operations.
- LIC staff will be able to purchase an interest in LIC Investment
Shares, through a Staff Share Unit Trust.
- New Clauses will be added to the Constitution to prevent external
parties taking a beneficial interest in the LIC Shares ie preventing farmers
owning shares on behalf of other external parties. This will prevent the
perception of any external control and to prevent the transfer of wealth to
non-dairy farmers.
ends
Background :
LIC''s share structure, introduced in 2004, was innovative and popular with
shareholders. However, it also presented a range of issues which the LIC
Board and Shareholder Council considered over a number of years :
- Share price
Investment Shares traded at a significant discount to their underlying value
because of the restriction on who could hold shares (Co-operative members
only), and limited trading due to the 30:1 restriction.
- The discount created fair entry and exit issues for shareholders eg
- current shareholders - the fair value of their shareholding was not
reflected in their balance sheets
- exiting shareholders - the compulsory sale of their Investment Shares
did not reflect the fair value of their share in the company.
o New and expanding shareholders bought in below fair value.
- The discounted value of the shares, therefore, did not reflect the
fair value of the company - limiting LIC''s ability to raise additional
capital from shareholders, should it need to do so in the future.
End CA:00166870 For:LIC Type:GENERAL Time:2008-07-01:11:53:10