Stalemate continues between Kerry Co-op and shareholders

The stalemate between Kerry Co-op and a number of its shareholders shows no sign of ending over a proposed ‘cash for shares’ scheme put forward by the board of the co-operative.

Although the full details of the planned scheme are yet to be released, one shareholder claimed that it is the “least tax-efficient option available to shareholders to realise the value of their shares”.

Speaking to AgriLand, the shareholder said: “With this scheme we will be paying 55% tax in the form of income tax, PRSI and USC.”

This contentious issue was raised back in February when the preliminary details for the Equity Redemption Scheme was distributed to shareholders.

The shareholder said that the proceeds of the scheme will be considered as an income, and that this would put those shareholders who are in receipt of some allowances and grants “in a precarious position”.

However, Kerry Co-ops’s company secretary Thomas Hunter McGowan argued that “no two people have the same tax situation”.

“This scheme will be better for those on the lower tax rate,” said Hunter McGowan, speaking to AgriLand.

Furthermore, he said that the shares are ‘locked in’ and that there was “no other option” for discharging the shares except through the proposed scheme.

The shareholder claims, though, that this form of redemption scheme would benefit only a small minority of shareholders.

Questions

The questions over taxation started as soon as details were distributed to shareholders.

The tax implications are largely due to the fact that the co-operative no longer meets the ‘Section 701’ criteria – that would have traditionally protected agricultural co-ops from tax liabilities – due to its proportion of members not actively farming.

It is understood that, at the time, Revenue was challenging the valuation at which co-op shares have been transferred for gift/inheritance tax purposes.

According to a document seen by AgriLand, Revenue noted that a single share is roughly worth €540 – considerably more that the €300 valued shares sold up to that point on the ‘grey market’.

The scheme is due to be voted on by shareholders at the upcoming annual general meeting (AGM).

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