Solution proposed for SIFs to address shareholder dispersion issue

Over 9 million participants to the Mass Privatisation Programme could soon pay some of their taxes to the state not with cash but with shares. It is about the residual shares in SIFs, which most Romanians got but know nothing about.

The proposition comes from the Bucharest Stock Exchange manager Stere Farmache, and could address the issue of the serious shareholder dispersion of the five financial investment companies. However, the Finance Ministry and the National Securities Commission (CNVM) need to agree to this first. “We can link the IT systems of the state tax authority offices with the BSE system so that when the taxpayers go to pay their taxes, they can be notified of these shares and be offered the possibility to sell them right then and there, and practically pay their taxes with this money,” Farmache said.

The residual shares in SIFs Romanian citizens hold are worth at least 250 million euros and account for hefty percentages of the capital of these companies.

There are about 7 million people who own 130 RON in shares each. Estimates of the real number of such people even point to 9 million.

At present, the few people that know they own such shares and want to sell them have to turn to a brokerage company authorised to deal on the Bucharest Stock Exchange. Prior to that, they have to get an account abstract from Regisco, the company that keeps the shareholder register.

The cumbersome procedure for sale compared to the value of the shares and the refusal of many brokers to accept sell orders for such a low value have made SIF management teams and capital market representatives think of solutions so that people could sell the stocks and the SIFs could get rid of these shareholders who would not come to collect their dividends and vote during General Meetings of Shareholders anyway.

The SIF officials say they have been looking into the possibility to repurchase these shares for quite a while now, in order to be able to reduce their shareholder dispersion, which makes it hard to achieve quorum during Extraordinary General Meetings of Shareholders. The costs of such an operation are extremely high for the SIFs, even considering as little as the costs of mailing 7 million letters or 7 million money orders.

The number of shares in four of the SIFs ranges from 5 to 10, while in the fifth, SIF Muntenia, residual shareholders own 38 shares. The difference comes from the fact that this company decided a number of years ago to disburse the dividends residual shareholders were entitled to collect, in form of bonus shares. SIF shares are currently worth 1.5 to 2.6 RON on the Bucharest Stock Exchange.

SIF shares were distributed to everyone that used the coupon they got as part of the Mass Privatisation Programme back in 1992. Everyone who had turned 18 by then had the right to participate in this programme.