capitaregistrars.com | 23

The view from Capita Registrars

Without doubt we have seen the incidence of attempted cheque fraud increase since the

introduction of chip and pin

The parent company

FRANCESCA TODD

Deputy Group Company Secretary The Capita Group plc

What’s your current view about removing cheques for dividend

payments? Have you made any moves to prepare for

it? We are keen to move to paying a paperless dividend. Our Articles are in place to allow this, and we are reviewing the market to consider this further. We would like to remove this layer of payment as we believe that this will allow our shareholders to receive their dividends promptly, reduce cost for our shareholders and reduce risks for both the shareholder and the company. Given that we have a small number of private shareholders we expect to encounter fewer issues than other companies but this element is not a determining factor in our enthusiasm for the proposal.

What do you see as the key benefits for you and your shareholders? Which of these is most important to

you as a company? The key benefits to Capita would be reduction of the risk of fraud, reduced impact on the environment and reduced cost to the company. All of these issues benefit the shareholder both in the short term and longer term.

Have you come under any pressure from shareholders to reduce the use of paper generally?

No not really, however our private shareholder base is comparatively small. Designing processes that avoid or minimise the use of paper is a key focus for our business as a whole, so this would just be another step forward in this effort.

If you were to stop using cheques for dividend payments, would you also review how you

distribute tax vouchers? Yes, the two would need to go hand in hand and this could also be a move to a consolidated tax voucher.

How do you expect other companies to approach the issue and will market trends have any impact on

your own decisions?Market trends will impact our decision as this will also lead the system changes within the registrar market place. Other companies with a higher level of private shareholders, I am sure, will be considering this carefully as the cost benefits will be higher than for a company like Capita.

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If you have any questions about paperless dividends, please contact your relationship manager.

MICHAEL KEMPE

Chief Development Officer Capita Registrars

What should companies do now?

It would appear that the eventual

introduction of paperless dividends is inevitable but each company needs to look at their shareholder base and decide what’s best for them. Capita has produced a guidance note on the issues companies need to consider and the action they need to take. It is important that companies discuss these with their relationship manager should they be considering removing cheques from the dividend process.

How should companies prepare themselves?

Firstly, regardless of how companies wish to proceed, we would encourage clients to make changes to their Articles now so as to ensure they have flexibility in the future. This appears to be the strategy new companies are taking although companies need not necessarily implement the change until such time as they have completed a full analysis of the options they wish to provide to shareholders.

One key issue that companies or their advisers need to be wary of is implementing anything that will handcuff them in the future. For example, they must give themselves enough flexibility to choose different electronic payment options rather than specifying one in the Articles that may not be the best solution for their shareholders or them.

What else should companies consider?

There are many considerations for companies including options such as scrips or DRIPS but one obvious one is tax vouchers. If cheques are no longer the default but companies still send out tax vouchers with each dividend then the benefits of the change are markedly reduced. Companies should not only certainly consider sending out a single consolidated tax voucher annually but also whether these should be available on an internet portal for customers to download.

While ultimately a move to remove paper is more efficient for companies and shareholders, costs will not be immediately decreased due to the set up costs involved. Companies will need to run a communication exercise to allow shareholders to choose from the options available or complete bank mandates (preferably via the internet).

The other major consideration is reducing fraud. As can be seen elsewhere in this debate there are differing views on the matter but we have seen the incidence of attempted cheque fraud increase since the introduction of chip and pin (especially for overseas shareholders) – as fraudsters get pushed off one area they move onto another.

It is clear that fraudsters also attempt bank mandate fraud but we believe the fraud controls in this area (security letters for example) provide better protection than is available for cheques. 

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