Updated 31 July 2018
Launch of goodwill payment scheme - 31 July 2018
Our goodwill payment scheme for eligible investors who sold our preference shares between 8 and 22 March 2018 (inclusive) is now open for claims. Read the full announcement which includes details of how to make a claim.
The full terms and conditions of the Scheme and instructions for making a claim, together with updated frequently asked questions, are available on the KPMG website at: www.kpmg.co.uk/aviva-scheme.
Update: 1 June 2018
- The Companies Act 2006 (s.641(4)(b)(ii)) provides that a company may, through a reduction of capital, repay any paid-up share capital in excess of the company’s wants. In Aviva plc’s ("Aviva") 2017 full year results announcement Aviva advised investors that it was considering using this mechanism to return capital to preference shareholders and cancel one or more series of the preference shares issued by Aviva and General Accident plc ("GA"). This is one of a number of options Aviva is considering for the deployment of £2 billion surplus capital in 2018. No decision has yet been taken. If and when a decision is taken, Aviva and GA will make the appropriate market announcements.
- The fact that the preference shares are described as “irredeemable” does not prevent them from being subject to Aviva or GA’s ability to re-pay them in accordance with their terms following a reduction of capital. This is a different mechanism under law to redemption.
- The preference shares are currently part of Aviva's regulatory capital structure, but that does not in itself prevent a reduction of capital given the other funds available to Aviva. Changes in legislation since the preference shares were issued currently mean that the preference shares will cease to count as regulatory capital from 2026.
- A reduction of capital of this nature would need to be conducted in accordance with the process set out in the Companies Act 2006, including the requirements for shareholder and Court approval, and in accordance with the terms of the relevant series of preference shares to be cancelled.
- Condition 4(iii) of the terms of each issue of preference shares sets out the preference shareholders’ entitlement on a return of capital (other than on a winding up, redemption or purchase). This would apply on a return of capital following a reduction of capital through which the preference shares are cancelled.
- Under Condition 4(iii) of the terms of each issue of preference shares, preference shareholders are entitled to receive an amount per preference share equal to the nominal (or “par”) value of their preference shares together with all accruals and arrears on the dividend (or “coupon”). All the preference shares have a par value of £1.00. In addition, the GA preference shareholders are entitled to the premium paid on the issue of their preference shares. The £110 million 7.875% GA Preference Shares were issued with a premium of 0.749 pence per preference share and the £140 million 8.875% GA Preference Shares were issued with a premium of 0.885 pence per preference share.
- If either Aviva or GA were to seek to cancel their preference shares through a reduction of capital they would need to obtain the approval of the members of the relevant company at a general meeting or annual general meeting. In this case, a notice containing the resolution would be sent to all the shareholders of the relevant company (including its preference shareholders).
- Both ordinary and preference shareholders would be entitled to vote on the resolution. They would vote together as a single group of shareholders as provided for in the terms of issue (i.e. there would be no separate preference shareholder vote). In the case of a resolution for the reduction of capital of Aviva, on a poll ordinary shares will carry one vote per share and preference shares will carry four votes per share. In the case of a resolution for the reduction of capital of GA, on a poll ordinary shares will carry one vote per share and preference shares will carry one vote per share.
- The resolution approving the reduction of capital and cancellation of the preference shares would be passed if at least 75% of the total votes cast on the resolution voted in favour.
- Aviva is the sole holder of the ordinary shares in GA and would be entitled to exercise its votes on a resolution for the reduction of capital in these circumstances. Aviva has sufficient votes to approve any such resolution at a meeting of GA.
- As any return of capital and cancellation of the preference shares following a reduction of capital would be in compliance with the conditions of the preference shares it would not constitute a variation or abrogation of the rights of those preference shares (and no separate approval from the preference shareholders would be required).
- If a resolution approving the reduction of capital and the cancellation of the preference shares is passed, the relevant issuer (Aviva or GA as applicable) would then need to apply to Court for the reduction of capital to be approved. If the Court approves the reduction of capital, the preference shares would be cancelled upon the Court order being registered or delivered to the registrar and the preference shareholders would be paid the amount set out in Condition 4(iii) of the relevant series of preference shares.
- There are other available methods to retire the preference shares by agreement with the relevant holders and with the necessary approvals from ordinary shareholders and other stakeholders, for example market purchases or tender offers. For the avoidance of doubt neither Aviva nor GA have made any market purchases of preference shares since the date of the 8 March announcement.
Read our latest statement regarding our preference shares.