"Many of Britain’s most famous plcs have been part of high-profile US-based M&A activity, particularly over the past fifteen years, and the implications of this is that many UK shareholders now have an interest in American firms."
Families of shareholders who died with an interest in British plcs face, on average, up to one year’s delay in gaining probate due to the complexity of liquidating shares in firms which have subsequently been bought by American companies over the past two decades.
At the moment, this issue alone is adding an average delay of up to twelve months on top of the already lengthy probate process when it comes to liquidating shares in major companies such as CRH, Cadbury Schweppes, Pfizer and Ferguson, among many others.
Just from our organisation alone – we have seen cases involving former UK plcs which have been bought by US firms since the early 2000s adding months of delays when it comes to winding up estate administration, after a sample of 748 cases was measured over the past five years.
What’s causing the delay? The requirements of 'medallion stamps'
Unlike the UK, US transfer agents (or US share registrars) and financial institutions require medallion signature guarantee stamps on share transfers, which have to be secured during the probate process. While not standard practice in the UK, the medallion signature guarantee stamp has become the standard way for US and Canadian institutions to authenticate and greenlight securities transactions. This stamp asserts that the person signing over shares or other securities is capable of doing so and has the authority to sign for the deceased shareholder, for example. Due to the liability they take on, stamp providers set stringent compliance requirements for the person needing the stamp. Securing the necessary documents and information has added weeks, and in many cases, months to the process. This adds a layer of complexity that isn’t present for UK share transfers.
Understanding The Cadburys Effect
Many of Britain’s most famous plcs have been part of high-profile US-based M&A activity, particularly over the past fifteen years, and the implications of this is that many UK shareholders now have an interest in American firms. We call this ‘The Cadburys effect’ – a seemingly British firm now part of an American conglomerate.
Many elderly UK shareholders bought shares in what were once UK firms, perhaps decades ago. Executors dealing with the estate administration now find they are owned by US holding companies. These shares are now subject to the rules of a US institution, and to US state and even (US) federal laws, with stricter compliance steps and hurdles, that many solicitors winding up exclusively UK-based probate matters would not normally have to contend with.
It is taking longer to wind up estates affected by these changes, as those unused to the lengthier US procedures can struggle to meet the requirements of the institutions. This places strain on practitioners, executors and families alike.
Further complexities for higher value share portfolios
When UK estates have US assets valued over $60,000 USD at death, the delays are worsened by needing US estate tax clearance, which is taking at least 18 months now.
International compliance mismatch
While many of these firms are typically some of Britain’s most famous companies, we’re also finding many European families facing similar complexities, in many cases even longer, not least because of the challenges they experience meeting country-specific compliance and probate requirements across borders.
Minimising the impact
One main way shareholders can help navigate this is to keep their address information up to date with registrars and transfer agents. This means crucial dividend statements and notices about mergers and other corporate actions are going out to the right place, lessening the risk of assets being considered ‘abandoned’, or information about changes of registrar or changes in the balance or status of your shares going astray.
We get many enquiries from family members of deceased shareholders, who say “he had assets everywhere”, but with no paper evidence at all.
Elderly clients could consider a letter of wishes for their executors, detailing their known assets and who is managing them; to make inventorying the estate easier when the time comes.
