Transferring Foreign Shares – The end of an era
At the beginning of the year it was announced that our beloved chocolate brand Cadbury’s was to be acquired by US Food Company, Kraft.
On the 2 February all Cadbury shareholders were given an option to vote and agree with the proposed acquisition but I doubt whether shareholders, possibly like your client, were informed of the difficulties that this could cause when they wanted to sell or transfer their investment.
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As you know, dealing with UK assets after death is relatively straightforward but dealing with an estate comprising overseas assets (like Cadbury’s shares since they are now an American holding) can be complicated due to the unfamiliar laws and processes involved.
History repeating itself
This is not the first time that the business transaction of a company like Cadbury’s has caused problems for Private Client Practitioners.
Back in 1969 Cadbury’s merged with US drinks company Schweppes creating Cadbury Schweppes. For shareholders this was just a simple name change on their certificates and it was not until 2008 that problems started to occur in estate administration.
After the demerger of Cadbury Schweppes in 2008, the beverage part of the company went on to form the Dr Pepper Snapple Group (DPS). For UK Cadbury shareholders this meant that their holdings were split between the two brands; they once again had shares in Cadbury’s (albeit not as many) but they also now had shares in DPS. For every Cadbury Schweppes share, shareholders received 0.36 of a Cadbury PLC share and 0.12 of a DPS share. The remaining fractions of the shares were sold and cheques posted to the shareholder.
Even though the majority of UK DPS shareholders did not want the shares in the first place, if still owned at the date of the death, their personal representatives is required to transfer the funds back into the estate.
Shares in the USA
The transfer or sale of UK shares is extremely straightforward and can be done at little expense and relatively quickly, doing the same for international shares is far more time consuming and costly.
This is because:
- Unlike in the UK a holding must be transferred from the deceased before the shares can be sold. After the receipt of the transfer documents the transfer agent can take up to 2 weeks to process them
- Various documents comprising the transfer package require notarising, a Medallion Signature Guarantee Stamp, and dating within 60 days.
- The new shareholder statement is often mailed via “normal mail” which can result in it coming by sea, with the resultant delay that entails.
- The matter is handled without urgency and you are often required to continually chase those involved generating an escalating a large phone bill whilst you are doing it!
- Additionally, if you are required to sell the shares this can take a further 6 weeks as the stockbrokers dematerialise the holding, deal with US imposed procedures and then sell the holding.
If you do happen to be administering an estate with US shares then it can often be in the best interests of your clients for this work to be outsourced to an Asset Transfer agent (a specialist in this field). Outsourcing this type of work could be beneficial from both a time and costs effective basis as such matters are dealt with on a daily basis by asset repatriation experts like Title Research.
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