TIDMCRC
RNS Number : 3259N
Circle Property PLC
20 January 2023
THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN
(TOGETHER, THIS "ANNOUNCEMENT") IS RESTRICTED AND IS NOT FOR
RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY
OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES, AUSTRALIA,
CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER
JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION
WOULD BE UNLAWFUL.
THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT
CONSTITUTE OR FORM ANY PART OF AN OFFER TO SELL OR ISSUE, OR A
SOLICITATION OF AN OFFER TO BUY, SUBSCRIBE FOR OR OTHERWISE ACQUIRE
ANY SECURITIES IN THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, THE
REPUBLIC OF SOUTH AFRICA OR IN ANY OTHER JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NO PUBLIC OFFERING
OF THE B SHARES IS BEING MADE IN ANY SUCH JURISDICTION. ANY FAILURE
TO COMPLY WITH THESE RESTRICTIONS MAY CONSTITUTE A VIOLATION OF THE
SECURITIES LAWS OF SUCH JURISDICTIONS.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF ARTICLE 7 OF EU REGULATION 596/2014 (AS AMED) (WHICH FORMS PART
OF DOMESTIC UK LAW PURSUANT TO THE EUROPEAN UNION (WITHDRAWAL) ACT
2018 (AS AMED)). UPON THE PUBLICATION OF THIS ANNOUNCEMENT VIA A
REGULATORY INFORMATION SERVICE, THIS INSIDE INFORMATION IS NOW
CONSIDERED TO BE IN THE PUBLIC DOMAIN.
20 January 2023
Circle Property plc
("Circle", the "Company" or the "Group")
Capital Reduction, Proposed Return of Capital and Notice of
Extraordinary General Meeting
The Board of Circle Property plc (AIM: CRC), is pleased to
announce a Capital Reduction, proposed Return of Capital through
the issue of B Shares and Notice of Extraordinary General
Meeting.
The Directors believe that one of the fairest and most efficient
ways of returning cash to Shareholders is by creating B Shares
whereby the Company will be able to make successive bonus issues of
redeemable B Shares to Shareholders and to redeem them shortly
thereafter without further action being required by
Shareholders.
Subject to the passing of the Resolutions at the Extraordinary
General Meeting and successful application for reporting fund
status as detailed below, the Board expects that the first Return
of Capital of not less than GBP30 million, being GBP1.03 per
Ordinary Share (such figure being the proposed minimum quantum of
the Return of Capital (i.e. GBP30 million) divided by the total
number of Ordinary Shares in issue at the relevant record date),
will take place in March 2023.
The Return of Capital (including the Capital Reduction and the
creation and capitalisation of the B Shares) requires Shareholder
approval of the Resolutions to be proposed at an Extraordinary
General Meeting of the Company to be held at the offices of Oak
Group (Jersey) Limited, 3rd Floor, IFC5 Castle Street, St. Helier,
Jersey, JE2 3BY, Channel Islands at 3:00 p.m. on 15 February 2023,
to enable this and subsequent capital returns.
A copy of the Circular containing more information in relation
to the Capital Reduction, Proposed Return of Capital and Notice of
Extraordinary General Meeting will be posted to Shareholders on 24
January 2023 and will be available on the Company's website at
https://www.circleproperty.co.uk/investors/reports-and-presentations/2023
shortly.
Terms used in this announcement but which are otherwise
undefined shall have the same meanings as set out in the Circular.
This announcement and the summary of the Capital Reduction and
Proposed Return of Capital should be read in conjunction with the
Circular.
Details of the Capital Reduction, Proposed Return of Capital and
Notice of Extraordinary General Meeting
Introduction
Since admission to AIM in 2016, the Company has suffered from
limited liquidity in the Ordinary Shares and the share price has
remained at a significant discount to the Company's net asset value
("NAV"). Consequently, on 14 February 2022, the Company announced
its strategy to make targeted asset sales in an orderly manner over
a period of two to three years (if not sooner). The Board stated
that it was committed to maximising returns and delivering value to
Shareholders and expected that a minimum of two returns of capital
would be made to Shareholders.
As detailed in the Company's Half-year Report released on 7
December 2022, the Board continues to progress the Company's
divestment programme with a view to returning capital to
Shareholders. The Directors believe that one of the fairest and
most efficient ways of returning cash to Shareholders is by
creating B Shares whereby the Company will be able to make
successive bonus issues of redeemable B Shares to Shareholders and
to redeem them shortly thereafter without further action being
required by Shareholders.
The Company is now well placed to commence the first return of
capital directly to Shareholders in March 2023, ensuring that the
Company adheres to the timeline envisaged in its divestment
programme. The Circular gives further details of how capital can be
returned and seeks Shareholder approval for the Resolutions to be
proposed at an Extraordinary General Meeting to be held on 15
February 2023 to enable this and subsequent capital returns.
Subject to the passing of the Resolutions at the Extraordinary
General Meeting and successful application for reporting fund
status as detailed below, the Board expects that the first Return
of Capital of not less than GBP30 million, being GBP1.03 per
Ordinary Share (such figure being the proposed minimum quantum of
the Return of Capital (i.e. GBP30 million) divided by the total
number of Ordinary Shares in issue at the relevant record date),
will take place in March 2023.
Further announcements will be made by the Company in due
course.
Background
In the Half-year Report, the Company announced that
approximately 60 per cent of the Company's property portfolio by
value had been sold since the announcement of the divestment
strategy in February 2022 and whilst the challenging macroeconomic
backdrop referenced in the Half-year Report has continued to impact
the broader property investment market, the Company has continued
to achieve a number of sales.
Since September 2022, a further four properties (710 Aztec West,
Bristol; Elizabeth House, Staines; Building K3, Kents Hill Business
Park; and 36 Great Charles Street, Birmingham) have been sold at an
aggregate value of GBP13.96 million. The Company's cash balance as
at the date of this announcement is approximately GBP32.6
million.
In addition, contracts have been exchanged to sell the Company's
remaining property in Birmingham (Somerset House, Temple Street),
which is expected to complete in February 2023, for a consideration
of GBP15.18 million. Subject to the timing of the first Return of
Capital and completion of the sale of Somerset House, the first
Return of Capital is expected to be for a minimum of GBP30 million
and up to approximately GBP46 million.
In addition, the Board anticipates that, subject to market
conditions, the Group's remaining three properties, two in Pavilion
Drive, Northampton and Concorde Park in Maidenhead, should generate
proceeds of approximately GBP19 million, which it is intended will
be distributed to Shareholders as soon as reasonably possible after
the last property sale. As announced on 7 December 2022, it is the
Board's intention to liquidate all of the Group's remaining assets
before the end of the Company's current financial year, so long as
there remain interested buyers at respectable pricing levels.
Further updates will continue to be made to Shareholders in due
course, as and when appropriate.
Reduction of Capital
Resolution 1 to be proposed at the Extraordinary General
Meeting, if approved, will approve the reduction of the Company's
stated capital from GBP44,147,091 to GBP4,414,709.10 by cancelling
and extinguishing capital to the extent of GBP1.36 (being the
reduction in stated capital of GBP39,732,381.90 divided by the
29,215,555 Ordinary Shares in issue) on each issued fully paid up
ordinary share of no par value each in the Company, with the
resulting reduction moneys being credited to a special reserve of
the Company, the 'capital redemption reserve' (the "Capital
Reduction").
In accordance with the Jersey Companies Law, the Capital
Reduction will be supported by a solvency statement to be made by
the Directors in advance of the Extraordinary General Meeting,
which will be available for inspection by Shareholders at the
Company's registered office from the date of its execution.
The Capital Reduction shall in no way affect the validity of
Shareholders' existing share certificates or CREST holdings.
The Directors will apply the capital redemption reserve created
by the Capital Reduction, as well as the Company's retained
earnings reserve, to make successive bonus issues of redeemable B
Shares in order to return capital to the Shareholders, further
details of which are set out below.
Return of Capital through B Share Issues
Resolutions 2, 3 and 4 relate to the B Share issues to enable
the Company to distribute cash from the proceeds of its disposals
to the Shareholders through issues of B Shares (the "B Share
Issues").
If Resolution 1 is duly passed, the Shareholders will have
approved the reduction of the Company's issued share capital and
the crediting of the resulting moneys to a newly formed special
reserve of the Company. The Company's objective in so reducing its
capital is to create additional distributable reserves to enable
the Company to distribute cash from the proceeds of its disposals
to Shareholders.
In order to enable the Directors to create B Shares, the
Company's Articles will need to be amended to include a New Article
167 (B Shares). Resolution 2 would amend the Articles to insert New
Article 167, Resolution 3 permits the Directors to capitalise
reserves and Resolution 4 will provide the authority to allot such
B Shares.
If Resolutions 2, 3 and 4 are passed, the Company will have a
mechanism to enable it to return cash to Shareholders by the
Directors capitalising amounts standing to the credit of the
Company's reserves and then applying the resulting amounts for the
purpose of fully paying up the appropriate number of B Shares by
way of transfer of such sum or sums to the Company's stated capital
account for the B Shares. Such B Shares would then be issued to
Shareholders on the basis of one new B Share for each Ordinary
Share held at the record date for the relevant B Share Issue and,
shortly thereafter, redeeming them and cancelling them. For the
avoidance of doubt, notwithstanding any B Share Issues,
Shareholders' holdings of Ordinary Shares in the Company will not
be impacted and the total number of Ordinary Shares in the Company
in issue will not change.
Following the redemption and cancellation of the B Shares, the
redemption proceeds will be sent to Shareholders, either through
CREST to uncertificated Shareholders, via BACS to certificated
Shareholders who have lodged a BACS mandate with the Registrars or
via cheque to certificated Shareholders who have not lodged a BACS
mandate with the Registrars. No cheques will be dispatched to any
Shareholder from whom the Registrars have received notification of
multiple instances of returned mail.
Further details of the B Share Issues are set out below.
The structure of the B Share Issues should result in the
majority of UK taxpayers receiving their cash proceeds on
redemption of the B Shares as capital. Part III of the Circular
sets out a summary guide to certain potential tax consequences for
Shareholders who are UK residents for tax purposes.
Returning cash to Shareholders via B Share Issues
The advantages of returning capital via B Share Issues rather
than via a tender offer are that:
-- it reduces costs for the Company, as there should be no need
to prepare further circulars to give effect to future Returns of
Capital, as is the case with tender offers, and no need for the
Company to engage a broker to undertake the tender on its behalf.
Details of each Return of Capital would be notified to Shareholders
through an announcement through a Regulatory Information Service (a
copy of which would be posted to Shareholders);
-- all Shareholders will automatically participate in the
redemption process and they would be treated equally;
-- subject to the Resolutions relating to the Capital Reduction
and the B Share Issues being passed at the Extraordinary General
Meeting, Shareholders would not be required to take any further
action to give effect to future Returns of Capital; and
-- there would be greater certainty for the Company regarding
the rate of returns of capital to Shareholders (unlike tender
offers, capital returns under the B Share Issues would be mandatory
and would apply to all Shareholders on a pro rata basis).
However, for some Shareholders, there may be some disadvantages
in returning capital via the B Share Issues relating to the timing
and mandatory nature of the scheme. Unlike a tender offer,
Shareholders will not be given a choice as to whether or not to
participate in a Return of Capital and, for those Shareholders who
hold Ordinary Shares in the Company through a number of different
vehicles, they would not be given the choice as to which of their
vehicles should participate in a Return of Capital. This could
potentially lead to adverse tax consequences for certain
Shareholders as they may not be able to structure their returns in
the most tax efficient manner.
Taxation of the B Share Issues
Each redemption of B Shares should be treated as a disposal by
the Shareholder of their B Shares for UK tax purposes. This may,
subject to the Shareholder's individual circumstances and any
available exemption or relief, give rise to a chargeable gain (or
allowable loss) for the purposes of UK taxation of capital gains
(for individual Shareholders) or corporation tax on chargeable
gains (for corporate Shareholders).
Furthermore, Shareholders participating in the B Share Issues
are advised to consider their investment objectives and their own
individual financial and tax circumstances. Shareholders who are in
any doubt as to their tax position should seek advice from their
own professional adviser.
To mitigate the risk of disposal proceeds from the B Share
Issues being taxed as offshore income gains, the Company will be
making the necessary application for reporting fund status
shortly.
The Directors have been advised that, as a consequence of the
implementation of the proposed B Share Issues, the Company is
likely to be treated as an "offshore fund" for the purposes of the
Taxation (International and Other Provisions) Act 2010. Under this
legislation, any gain arising on the sale, disposal or redemption
of an interest in an offshore fund will be taxed at the time of
such sale, disposal or redemption as income and not as a capital
gain. This does not apply, however, where an offshore fund is
accepted by HMRC as a "reporting fund" throughout the period during
which interests in the Company have been held.
The Company will be applying for reporting fund status shortly
for the current and subsequent accounting periods during which the
Company is an offshore fund.
A reporting fund must report to each United Kingdom tax resident
Shareholder such Shareholder's share of the income of the offshore
fund each year. This will be taxable in the hands of the
Shareholder as income (and, subject to what is said below regarding
offshore funds that invest more than 60 per cent. of their assets
in debt and debt-like investment) as a dividend, regardless of
whether or not it is distributed to the Shareholder.
To mitigate the risk of disposal proceeds being taxed as
offshore income gains, the Company will be making the necessary
application for reporting fund status. The Company is expected to
be accepted as a reporting fund for as long as it meets all of the
qualifying conditions until notice is given to HMRC that it intends
to leave the regime or HMRC excludes it from participation.
Whilst it is currently expected that the Company will be
accepted as a reporting fund by HMRC, if for any reason following
confirmation from HMRC that is not the case, which would result in
the proposed B Share Issues being treated as income rather than
capital, the Directors may look to pursue alternative ways of
returning cash to Shareholders.
Further details on reporting fund status are set out under the
sub-heading "The Company" in the section "United Kingdom Taxation"
in Part III of the Circular (Taxation). This section also contains
further information generally regarding taxation on the redemption
of B Shares.
Further information on the B Shares
No share certificates would be issued in relation to the B
Shares and the B Shares would not be listed or traded on any
exchange.
The B Shares would be non-transferable and would have limited
rights.
Given the very short period of time for which any B Share would
be in issue, it is unlikely that any dividends would become payable
on the B Shares. The rights and restrictions attached to the B
Shares are set out in New Article 167, which is set out in Part II
of this Circular.
Recommendation
The Board believes that the Resolutions and the implementation
of both the Capital Reduction and the B Share Issues are in the
best interests of the Company and the Shareholders as a whole.
Accordingly, the Board unanimously recommends that Shareholders
vote in favour of the Resolutions to be proposed at the
Extraordinary General Meeting, as all of the Directors holding
Ordinary Shares intend so to do in respect of their beneficial
shareholdings.
A copy of the Circular, together with the Articles and a draft
of the New Article 167 will be available for inspection (i) on the
Company's website:
https://www.circleproperty.co.uk/investors/reports-and-presentations/2023
shortly; and (ii) at the Company's registered office during normal
business hours on any Business Day from the date of the Circular
until the date of the Extraordinary General Meeting and will also
be available for inspection at the Extraordinary General
Meeting.
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Posting of the Circular 24 January 2023
Latest time and date for receipt of Forms 3:00 p.m. on 13 February
of Proxy for the Extraordinary General 2023
Meeting
Extraordinary General Meeting 3:00 p.m. on 15 February
2023
Completion of the first Return of Capital March 2023
DEFINITIONS
The following definitions apply throughout this announcement and
the Circular unless the context requires otherwise:
"AIM" the market of that name, operated by the
London Stock Exchange
"AIM Rules" together, the AIM Rules for Companies and
the AIM Rules for Nominated Advisers
"Articles" the Company's current articles of association
(as at the date of this announcement)
"B Shares" unlisted, redeemable, fixed rate preference
shares in the capital of the Company having
the rights and liabilities set out in New
Article 167
"B Share Issues" the proposed distributions of the proceeds
of the Company's disposals to Shareholders
through issues of B Shares
"Board" or "Directors" the directors of the Company, whose names
are set out in the Circular
"Business Day" any day on which banks are generally open
in England and Wales for the transaction
of business, other than a Saturday, Sunday
or public holiday
"Cenkos" Cenkos Securities plc, the Company's nominated
adviser and broker, incorporated in England
& Wales with company registration number
05210733
"Circular" the circular to be posted to Shareholders
on 24 January 2023
"CREST" the relevant system (as defined in the CREST
Regulations) for paperless settlement of
share transfers and holding shares in uncertificated
form, in respect of which Euroclear UK &
International is the operator (as defined
in the CREST Regulations)
"Company" or "Circle" Circle Property plc, a company incorporated
in Jersey on 4 December 2015 with company
number 120165
"CREST Manual" the rules governing the operation of CREST
as published by Euroclear
"CREST Regulations" the Uncertificated Securities Regulations
2001 (SI 2001/3755) and the Companies Uncertificated
Securities (Jersey) Order 1999 as amended
from time to time, and any applicable rules
made under those regulations
"Euroclear" Euroclear UK & International Limited, the
operator of CREST
"Extraordinary General the Extraordinary General Meeting of the
Meeting" or "EGM" Company to be held at the offices of Oak
Group (Jersey) Limited at 3rd Floor, IFC5
Castle Street, St. Helier, Jersey, JE2 3BY,
Channel Islands at 3:00 p.m. on 15 February
2023, notice of which is set out at the
end of the Circular
"Financial Conduct the UK Financial Conduct Authority
Authority" or "FCA"
"Form of Proxy" the Form of Proxy relating to the Extraordinary
General Meeting being sent to Shareholders
(where applicable) with the Circular
"FSMA" the UK Financial Services and Markets Act
2000 (as amended)
"Group" the Company and its subsidiary undertakings
"Half-year Report" the Company's interim results for the six-month
period ended 30 September 2022
"Jersey Companies Law" the Companies (Jersey) Law 1991 (as amended)
"London Stock Exchange" London Stock Exchange Plc
"MAR" or "Market Abuse the UK version of the Market Abuse Regulation
Regulation" (Regulation 596/2014)
"New Article 167" new article 167 to be inserted in the Articles
pursuant to Resolution 2 at the EGM
"Notice of Extraordinary the notice convening the Extraordinary General
General Meeting" Meeting set out at Part V of the Circular
"Ordinary Shares" ordinary shares of no par value in the capital
of the Company
"Prospectus Regulation the prospectus regulation rules of the Financial
Rules" Conduct Authority made under Part VI of
FSMA
"Registrars" Computershare Investor Services (Jersey)
Limited
"Regulatory Information one of the regulatory information services
Service" or "RIS" authorised by the London Stock Exchange
to receive, process and disseminate information
in respect of AIM quoted companies
"Resolutions" the resolutions proposed to be passed by
Shareholders at the Extraordinary General
Meeting, as set out in the Notice of Extraordinary
General Meeting at the end of the Circular
"Return of Capital" the consecutive returns of capital pursuant
to the allotment and redemption of B Shares
as contemplated by the Circular
"Shareholders" holders of the Ordinary Shares
"UK" or "United Kingdom" the United Kingdom of Great Britain and
Northern Ireland
"GBP" or "Sterling" pounds sterling, the lawful currency of
the United Kingdom
Enquiries:
+44 (0)20 7930
Circle Property Plc 8503
John Arnold, CEO
Edward Olins, COO
+44 (0)20 7397
Cenkos Securities plc 8900
Katy Birkin
George Lawson
Radnor Capital
Joshua Cryer +44 (0)20 3897
Iain Daly 1830
+44 (0)20 3757
Camarco 4992
Ginny Pulbrook
Toby Strong
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