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NewRiver Retail (NRR) Reconstruction and Complex Pay Scheme

NewRiver Retail announced before their AGM on the 12th July that they were going to change their domicile from Guernsey to the UK. This will assist with their move to the main London market which is in the process of being pursued. NewRiver is a commercial property REIT and it seems unlikely that shareholders will oppose this move which will involve a “scheme of arrangement”. Moreover, from questions posed at the AGM it was clear that there was to be a one-for-one share swap and the EPIC/TIDM ticker will remain the same so it should be a straightforward matter for investors.

Incidentally, there is a report of the Annual General Meeting which investors in the company might find interesting. One question not asked by me, or anyone else, at that meeting was what would happen to the existing director remuneration schemes as I rather assumed there would be no reason for major changes as neither the company or its directors were changing although obviously there are more obligations for fully listed companies in terms of remuneration reporting and votes thereon.

The actual Notice of a Court Meeting and EGM was subsequently issued. It is a long and complex document. In addition to voting on the Scheme of Arrangement itself, there are two other resolutions being put to the shareholders. One is to permit General Meetings to be called at 14 rather than 21 days notice. I always vote against such resolutions because I believe they are unnecessary and prejudice many shareholders. Many people, particularly overseas investors and those in nominee accounts, have difficulty in getting their votes in on time within 14 days.

Another resolution is to approve amendments to four bonus and share option plans. It seems that because of the company reconstruction awards under the previous bonus and option schemes will be crystallised as it will be considered a “change of control” under their rules. So awards under the Deferred Bonus Plan will vest in full. Awards under the Performance Share Plan will vest pro-rata subject to performance achieved. Holders of share options will be invited to exchange their options for new ones in the new company. It is expected all employees will agree to this although there is no compulsion to do so.

There are then 26 pages (p. 66 to 92) which define both the old and new remuneration schemes and the latter are quite incomprehensible. These cover:

  • A “Deferred Bonus Plan”
  • A “Performance Share Plan”
  • A  “Company Share Option Plan”
  • An “Unapproved Share Option Plan”

The principal T&Cs for these seem utterly opaque and entirely at the discretion of the Remuneration Committee – especially with respect to quantum and performance conditions. Moreover there are provisions to make post-hoc adjustments to performance criteria, and for additional shares to be awarded in respect of dividends paid to shareholders during the pre-vesting period. At least that appears to be the case although understanding these complex schemes is not easy.

This is surely an example of how remuneration schemes have become over-complex and need simplifying. This would have been a golden opportunity to do so. Instead we have proposals that few shareholders will comprehend or even study. So I will vote against the relevant resolution on remuneration while supporting the scheme of arrangement. I suggest other shareholders might wish to consider doing likewise.

Roger Lawson

One comment
  1. sharesoc says:

    Postscript: On the day of the Meetings to approve the Scheme of Arrangement and the new remuneration scheme, the former achieved 99.99% of votes in favour, but the latter only achieved 95%, plus 2.5 million votes withheld. It is surely unfortunate that more shareholders did not take the time to understand the pay proposals and vote against them.

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