The board of Kerry Co-op is calling on its shareholders to back its Share Redemption Scheme, the application process for which opens next week.

Shareholders who wish to avail of the scheme can make an application starting from Monday, May 13, up until Wednesday, June 5.

However, in order for the scheme to progress, shareholders will have to vote in favour of two rule changes at the co-op’s annual general meeting (AGM), which is set for June 19.

According to the co-op, the scheme will allow shareholders to redeem their ordinary shares for cash. There are 3,931,211 ordinary shares in issue by the business.

The co-op says that the voluntary scheme “recognises the evolution of Kerry Co-operative Creameries Ltd, and the differing ambitions of shareholders”.

“The provisions of this Share Redemption Scheme will allow all shareholders the opportunity to redeem their ordinary shares for cash,” argued Mundy Hayes, chairman of Kerry Co-op.

“The scheme is designed to give shareholders access to funds rather than shares. It will be of particular interest to many of our older members who are on low incomes and can redeem their shares at a very favourable tax rate,” he added.

The co-op points out that the Share Redemption Scheme is deemed a distribution, and is subject to income tax rather than capital gains tax.

The board is urging shareholders to pass the necessary rule changes when the AGM convenes.

These changes are to: write the scheme into the rule book; and to remove the restriction on the requirement to hold a 10% shareholding in Kerry Group plc.

The board acknowledged that whether or not someone wishes to get involved in the scheme will depend on their own circumstances, including their tax position.

Controversy

The planned scheme has caused a stir among some shareholders, who take issue with its tax implications.

Speaking to AgriLand, one shareholder said the scheme is the “least tax-efficient option available to shareholders to realise the value of their shares”.

“With this scheme we will be paying 55% tax in the form of income tax, PRSI and USC,” he added, saying that some shareholders, who are in receipt of certain allowances and grants, would be put in a “precarious position”.

However, Kerry Co-op’s secretary Thomas Hunter McGowan told AgriLand that the shares are “locked in”, and that there was “no other option” for discharging the shares except through the proposed scheme.