City of London Investment Group PLC Publication of circular (6149A)

TIDMCLIG

RNS Number : 6149A

City of London Investment Group PLC

02 June 2021

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED IN IT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, JAPAN OR THE REPUBLIC OF SOUTH AFRICA OR INTO ANY OTHER JURISDICTION WHERE TO DO SO MIGHT CONSTITUTE A VIOLATION OR BREACH OF ANY APPLICABLE LAW.

2 June 2021

For immediate release

City of London Investment Group PLC ("CLIG")

Publication of circular

Further to the announcement by the Company on 6 April 2021, the Company announces that it will today post to shareholders a circular to convene a general meeting of the shareholders of the Company (the "General Meeting") to be held at the Company's registered office at 77 Gracechurch Street, London EC3V 0AS at 12.30 p.m. on 29 June 2021. The purpose of the General Meeting is for shareholders to vote on a resolution to approve the appropriation of distributable reserves in respect of certain historic dividends and the entry into a shareholders' deed of release and a directors' deed of release each as described further in the circular.

Due to mandatory measures imposed by the UK Government as a result of the spread of the COVID-19 virus in the United Kingdom, the General Meeting will be convened with the minimum quorum of shareholders present in order to conduct the business of the meeting, which is in accordance with the latest guidance published by the Department for Business, Energy & Industrial Strategy and the Financial Reporting Council. Shareholders are therefore requested to appoint the Chairman of the General Meeting as his or her proxy as any other person so appointed will not be permitted to attend the General Meeting. Further details are set out in the circular.

The circular is also available on the website of the Company at www.clig.com. The circular includes a letter from the senior independent director, which is reproduced in the Appendix without material adjustment or amendment.

For further information please contact:

 
 City of London Investment Group      Tel: 001-610-380-0435 
  PLC 
  Tom Griffith, CEO 
 
 Beaumont Cornish Limited (Sponsor)   Tel: +44 (0) 207 628 3396 
  Roland Cornish, Michael Cornish 
 
 
 Zeus Capital Limited (Financial   Tel: +44 (0) 20 3829 5000 
  Adviser and Broker) 
  Martin Green, Pippa Hamnett

Beaumont Cornish Limited ("Beaumont Cornish" or the "Sponsor"), is authorised and regulated in the United Kingdom by the FCA, is acting exclusively for the Company and no one else in connection with the arrangements described in this Announcement and will not regard any other person (whether or not a recipient of this Announcement) as a client in relation to the arrangements described in this Announcement and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to the arrangements referred to in this Announcement.

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR.

Appendix 1

Letter from the Senior Independent Director, as set out in the Circular

The Circular includes a letter from the Senior Independent Director, which is reproduced in full below without material adjustment or amendment. Terms used below have the same meaning given to them as defined in the Part IV of the Circular.

"Introduction

The Board has become aware of a technical issue in respect of the payment of certain historic dividends paid by the Company in each of the financial years ended 31 May 2007 to, and including, 30 June 2019 (with the exception of the financial year ended 30 June 2018). The distributions affected by this issue are set out in paragraph 1 of Part II of this Circular (the "Relevant Distributions").

Accordingly, I, Peter Roth, as the Company's Senior Independent Director, am writing to you today to explain the proposals to address this issue and the action you are being asked to take, as the Chairman of the Board, Barry Aling, along with a number of our fellow Directors, are considered related parties under the Listing Rules in connection with the proposals described in this Circular.

This technical issue in respect of the Relevant Distributions is of an historic nature and there is no change to the financial outlook of the Company as a consequence. The Proposals described in this Circular do not affect the Company's existing distributable reserves nor its capacity to pay shareholder dividends going forward in accordance with the Company's dividend policy.

Background

The Companies Act provides that a public company may only pay a dividend out of its distributable reserves as shown in the last accounts circulated to members or, if used, interim accounts filed at Companies House. The requirement for the relevant accounts to have been filed applies even if the company in question has sufficient distributable profits and reserves at the relevant time in its financial records.

Whilst the Group has at all times had sufficient distributable reserves on a consolidated basis to cover the Relevant Distributions, those reserves had not always been distributed upward to the Company itself from its operating subsidiaries at the time of declaration of each Relevant Distribution and were not recorded, and therefore available, in the Company's own accounts. In addition, interim accounts in respect of the Company were not always filed, where required, with Companies House to show the availability of sufficient distributable reserves in respect of Relevant Distributions made by the Company. In such cases, this constituted a breach of section 838(6) of the Companies Act which requires a copy of the interim accounts to be delivered to Companies House.

Therefore, regrettably, the Relevant Distributions were made otherwise than in accordance with the Companies Act. The Board has reviewed the Company's internal financial reporting procedures to ensure that a similar situation does not occur in the future. Separately, and as part of a wider review of the Company's service providers, the Company is delighted to confirm the appointment of Prism Cosec Limited as its corporate company secretary with effect from 4 May 2021.

The purpose of this Circular is to convene a General Meeting to propose the Resolution, which will, if passed, give the Board authority for the appropriation of the distributable profits of the Company to the payment of each of the Relevant Distributions and to enter into the deeds of release described in Part II of this Circular and put all potentially affected parties so far as possible in the position in which they were always intended to be had the Relevant Distributions been made in accordance with the requirements of the Companies Act.

The Company has been advised that, as a consequence of the Relevant Distributions having been made otherwise than in accordance with the Companies Act, it may have claims against past and present shareholders who were recipients of the Relevant Distributions and against persons who were directors of the Company at the time of payment of the Relevant Distributions. It is therefore proposed that the Company enters into the Shareholders' Deed of Release and the Directors' Deed of Release. The consequence of the entry into these deeds by the Company is that the Company will be unable to make any claims against:

(i) past and present shareholders of the Company who were recipients of Relevant Distributions (the "Recipient Shareholders"); or

(ii) all past and present directors of the Company who were directors at the time a Relevant Distribution was made, being: (a) the Company's current Chairman, Barry Aling; (b) certain of the Company's current Executive Directors, namely Tom Griffith, Mark Dwyer and Carlos Yuste; (c) certain of the Company's current Non-Executive Directors, namely Barry Olliff, Jane Stabile and Rian Dartnell; and (d) the following former directors of the Company, Susannah Nicklin, Tracy Rodrigues, Lynn Ruddick, George Robb, Mark Driver, Valerie Tannahill, Andrew Davison, David Cardale, Allan Bufferd, Omar Ashur and Douglas Allison (the "Relevant Directors"),

in each case in respect of the payment of the Relevant Distributions otherwise than in accordance with the Companies Act.

The entry by the Company into the Directors' Deed of Release constitutes a related party transaction (as defined in the Listing Rules) as Barry Aling, Barry Olliff, Tom Griffith, Mark Dwyer, Carlos Yuste, Jane Stabile, Rian Dartnell and Susannah Nicklin are considered related parties under the Listing Rules (being persons who are, or were within the last 12 months, directors of the Company) and each of them is a beneficiary of the deed. Therefore, the Resolution will seek the specific approval of the Company's shareholders for the entry into the Directors' Deed of Release as a related party transaction, in accordance with the requirements of the Listing Rules.

Further details and an explanation of the business of the General Meeting and the related party transaction are set out in Part II of this Circular.

Notice of General Meeting

A notice of General Meeting of the Company which will be held at the Company's registered office at 77 Gracechurch Street, London EC3V 0AS at 12.30 p.m. on 29 June 2021 can be found in Part V of this Circular.

You are advised to read the whole of this Circular, including the Notice, and not to rely solely on the information contained in this letter.

Action to be taken

Shareholders can vote either:

   --     by logging on to www.signalshares.com and following the instructions;

-- by requesting a hard copy Form of Proxy from the Registrar on 0371 664 0300. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. The Registrar is open between 9.00 a.m. - 5.30 p.m. Monday to Friday, excluding public holidays in England and Wales; or

-- in the case of CREST members, by utilising the CREST electronic proxy appointment service in accordance with the procedures set out in the notes to the notice of General Meeting.

To be valid any proxy vote must be received by the Registrar by no later than 12.30 p.m. on 25 June 2021.

Further details are given in the notes to the notice of General Meeting set out on pages 22 to 24 of this Circular.

This letter is also being sent to those who have been nominated to receive information rights under section 146 of the Companies Act who do not themselves have a right to appoint a proxy or proxies. The attention of such nominated persons is drawn to note 10 to the Notice set out on page 24 of this Circular.

Recommendation

The Board, who has been so advised by Beaumont Cornish, believes that (i) the waiver of claims against the Relevant Directors pursuant to the Resolution and (ii) the entry into each of the Directors' Deed of Release and the Shareholders' Deed of Release, are fair and reasonable so far as the shareholders of the Company are concerned. Beaumont Cornish has taken into account the Board's commercial assessment of the effect of the Proposals. Further, the Board considers the Resolution is in the best interests of shareholders as a whole. The Interested Directors who are related parties as defined in the Listing Rules, have not taken part in the Board's consideration of these Proposals.

Accordingly, the Board unanimously recommends that shareholders vote in favour of the Resolution at the General Meeting, as the Independent Directors intend to do in respect of their own beneficial shareholdings amounting in aggregate to 16,202,898 Ordinary Shares, representing approximately 31.97 per cent. of the Company's current issued share capital and approximately 33.34 per cent. of the Ordinary Shares eligible to vote on the Resolution.

The Interested Directors and Susannah Nicklin, as related parties under the Listing Rules, being persons who are currently or were within the last 12 months directors of the Company, and who also hold Ordinary Shares, are precluded from voting any Ordinary Shares in which they are interested on the Resolution and therefore, they have each undertaken to abstain, and to take all reasonable steps to ensure that their respective associates abstain, from voting on the Resolution. As at 1 June 2021 (being the latest practicable date before the publication of this Circular), the Interested Directors and Susannah Nicklin held, in aggregate, 2,084,151 Ordinary Shares in the capital of the Company, representing approximately 4.11 per cent. of the Company's existing ordinary share capital.

In accordance with current best practice and to ensure voting accurately reflects the views of shareholders, it will be proposed at the General Meeting that voting on the Resolution will be conducted by poll vote rather than by a show of hands and the relevant procedures will be explained at the General Meeting.

If the Resolution is not passed, the Company may continue to have claims against the Relevant Directors and Recipient Shareholders.

The Board has taken steps to ensure that, in the future, the issues referred to in this Circular do not arise in relation to the payment of dividends. We are grateful for shareholders' understanding in respect of the issues set out in this Circular.

On behalf of the Board, thank you for your continued support of the Company.

Yours sincerely

Peter Roth

Senior Independent Director"

ENDS

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