Owning shares
I have just made a number of small investments in shares and have a few questions. Do ordinary shares pay a dividend? Why does it take up to three months to receive a share certificate? Having used one of the larger stockbrokers to buy shares, can I easily use a smaller broker, with lower fees, to sell? Do I need a share certificate to do this?
Ms A.G., e-mail
To a seasoned investor, the questions you ask may sound simplistic but in today's buoyant, but low-interest rate economy, where an increasing number of people are turning to equity investment, there are many out there who genuinely find the whole business bemusing. The burgeoning number of new small-scale investors will increase dramatically when the Telecom flotation process is complete.
On the question of dividends, ordinary shares generally pay out such a dividend twice a year. The first part is paid out after the company reports the results for the first half of its trading year and is called an interim dividend. The final dividend is paid after the release of full-year figures for the company. This figure is generally paid net of tax.
Only rarely will a dividend not be paid. This can happen in the case of new companies which need to retain all their profits from trading to reinvest in the company to help build market presence.
The argument is that such use of money in the early years is of greater benefit to the investor than the paying of a dividend which might deprive start-up companies of valuable financial resources at a time when the banks and other lenders may be wary of lending to them at attractive rates.
The other situation where a dividend is not paid is when the company has performed so badly that it cannot afford to pay dividends. This is usually a temporary situation, but not a pleasant one for those investors who have put their money in the shares for the income they will earn from dividends, rather than from the long-term growth in the value of the company.
The amount of the dividend is set by the board and ultimately approved, as part of the annual report, at the shareholders' annual general meeting. It is expressed as a payment in pennies (cents now that we are in the euro zone) or fractions thereof per share.
The board will usually consider a number of factors in setting the level of dividend payments. These obviously include the performance of the company in the previous year. But it will also look at the dividend policy of other public companies in its sector. While each company's financial situation is different, none wants to be seen as unattractive to investors in relation to its peers, lest it suffer a run on its stock.
In relation to the share certificate, I see no reason why it should take up to three months to receive such a certificate. This is especially so as you cannot trade your shares without the certificate and by delaying its arrival for three months, the authorities are effectively denying you the right to trade your shares should you choose to do so during that period.
Having spoken to various people connected with the equity market, I understand that a delay of about two weeks would be considered normal, although there is some variation.
Basically, each company has a registrar - normally a bank - which processes share certificates following dealings in shares. What you should do is find out who is the registrar for the particular company in which you hold shares - the company itself should be able to tell you or the information should be available in the annual report - and contact them to ascertain the cause of the delay.
On the question of stockbrokers, you are certainly not restricted in any way as to which one you use. By all means shop around. However, most of them seem to levy charges within a fairly narrow range - apart from special deals offered by particular brokers following large-scale flotations such as Irish Permanent, Norwich Union, First Active and Telecom Eireann.
It may be that smaller investors will get a better deal from smaller firms, and it is quite possible that one might be able to do a deal with a stockbroker if there were a regular flow of business to offer them in return.
I am in possession of a valid share certificate for a quoted Irish company, which was issued in the name of my grandfather. As I have inherited this property via two prior intermediaries (grandmother and father-in-law respectively), what legal proof do I need to claim ownership of these shares?
Mr M.M., e-mail
The simple answer is that you need to contact the registrar of the particular company in which the certificate grants shares. You don't tell me the name of the company but, by contacting it, you will be able to get the name of the registrar who will be best able to advise you on the procedures necessary to claim ownership.
The situation you outline is complicated. Stockbrokers to whom I have spoken say that it is not one they often come across - certainly not where the certificate has passed unmolested through three pairs of hands.
It is also somewhat unclear. In the normal course of events, the grant of probate issued at the time of your grandfather's death would have to be submitted to the company registrar by the executors of his estate. The certificate would generally be transferred to the names of the two executors or, ultimately, that of your grandmother, the initial beneficiary.
This apparently has not happened. Even at this juncture, the executors of your grandfather's estate could exercise the procedure, as I understand it. However, if one of the executors has since died you would also need to lodge a death certificate in relation to that executor with the registrar along with a stock transfer form signed by the surviving executor.
If both executors have since died, the position is more complicated and not one that my contacts have come across. However, it is likely that the registrar will be familiar with it. In any case, they are the experts in this detailed area of law.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 10-15 D'Olier Street, Dublin 2, or e-mail to dcoyle@irish-times.ie. This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering queries. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.
