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Originally Posted by Jim
Special dividend 32 cents Woooow
Good news indeed for shareholders Jim. I am not a holder but was meaning to a couple of months ago but decided instead to buy an apartment in Europe. Time will tell which was the better investment !
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The reference to paying the special dividend to payout IC's (as opposed to surplus cash) must signify that they expect a sell down by News Corp (note: if News Corp sold, all IC would be forfeited).
There have been rumours so this indication by the board can only cement them??
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Originally Posted by CJ
note: if News Corp sold, all IC would be forfeited.
Hi CJ, can you expand on that, why would the credits be forfeited?
Are there rules with the IRD and tax credits becoming defunct when there are changes in ownership greater than a certain percent?
thanks
~ * ~ De Peones a Reinas ~ * ~
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Did some digging found the answer
Originally Posted by IRD Website
Change of shareholder continuity
Imputation credits can only be passed on to shareholders if at least 66% of the company’s voting rights and/or market value interests haven’t changed hands, from the date the credits arose in the ICA to the date when they are passed on to the shareholders—see page 18 for special rules for qualifying companies.
Shareholders’ economic interests in a company are generally measured by reference to their direct and indirect voting interests in the company. In certain circumstances the shareholders’ economic interests in a company will also be determined by the market value of interests in the company. This happens when the voting interests don’t reflect the true economic interests held in the company. For more information about this, see our Tax Information Bulletin (TIB) Vol 3, No 7 (April 1992).
If a company’s shareholder interests change by more than 34%, the company has lost shareholder continuity. In this situation it must enter a debit in its ICA to eliminate any unused credit balance.
~ * ~ De Peones a Reinas ~ * ~
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Originally Posted by Silverlight
Did some digging found the answer
Thats the one. There are rules so you can pretty much ignore movements between small (<10%) shareholders.
But Todd sold out 10% so only need another 23%ish to sell, News Corp owns 40%ish?? so if they sell they are gone.
Normally if the transaction was orderly, a special dividend would be paid just prior. So preempting it suggests a non orderly rushed transaction??
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Hi guys Can you elaborate more about this IRD thing and the possible reasons why SKT have it....reading the IRD piece...Am I right to believe that this is a defensive weapon created by the IRD to deter hostile takeovers which seems to has a negative effect on everyone (e.g incl mum and dad investors) not just towards the hostile raider only???....
I can't quite understand the IRD rationale here..it seems destructive to me....as it forces the company into creating a special dividend whether it has surplus cash or not.
There are other defensive strategies to deter a hostile takeover...e.g shareholder rights issue trigger + heaps of others.
From my confused understanding of this IRD piece it seems SKT is more worried about the dumping scenario and not the possible takeover scenario..............or both?............Have I got the correct understanding of the IRD law????.
So why did the shareprice go up??..SKT is giving away part of its assets?...What happens in the future?...do they have to build the ICs up again and with the possibly the next dividend is not or only partially ICed??
Does that apply to STU now...has STU lost its IC with its major shareholder exiting
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Originally Posted by Hoop
Am I right to believe that this is a defensive weapon created by the IRD to deter hostile takeovers which seems to has a negative effect on everyone (e.g incl mum and dad investors) not just towards the hostile raider only???....
:
The imputation regime has nothing to do with takeovers but can be affected by them. The imputation regime was designed to prevent the double taxation of company earnings. A company pays tax on its profits. When the company pays tax this is recorded in an imputation credit account. When a dividend is paid these imputation credits can be attached to dividends to avoid taxing the same income twice. Rules around shareholder changes is to avoid trading in imputation credits. i.e the shareholders who owned the company when it made the profits and paid the tax should be the ones to benefit from the imputation credits. Cleaning out the imputation credit account by paying a special dividend could indicate a change of shareholders owning more than 10% could be imminent.
I am not sure about the rules for a publicly listed (widely held) company. A less than 10% holding can be traded without affecting the imputation credit account so I guess the 66% continuity would be based on transfers of more than 10% so a lot would depend on when shares are transferred and taxes paid. It would seem pretty harsh if a large shareholder could wipe out the imputation credit account without warning management.
Last edited by Aaron; 30-11-2012 at 10:50 AM.
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Good summary from Aaron. The rules are designed so that the shareholders that paid the tax receive the benefit. It is an anti-avoidance type rule to stop you transferring your shareholding to another person who can better use the imputation credits. The rational is a bit flawed as if the asset was a physical asset, rather than tax, there is no issue with this.
It would seem pretty harsh if a large shareholder could wipe out the imputation credit account without warning management.
I don't believe there is any room for IRD discretion on this.
Hoop - re:STU, my guess is yes. Per the AR2012, they had 18m IC's and roughly paid tax of $5m (new IC's) and IC's on dividends of $5m so they were essentially neutral annually. Therefore, it wont have an impact on normal dividends (since IC's attached normally less than the tax paid) but may effect a future special dividend.
Note: the likes of FBU don't have enough IC's as some of their profit is earned (and taxed) overseas. As such, they attach RWT credits as well.
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Thanks for that guys...much appreciated
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Member
Originally Posted by CJ
......
Note: the likes of FBU don't have enough IC's as some of their profit is earned (and taxed) overseas. As such, they attach RWT credits as well.
they attach RWT credits as well ?????
Rather they take them out of your dividend, thereby reducing the dividend paid out!!!!!
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