Memo 3 ~ MVF’s share structure

Updated 20th July 2007

Membership of Mole Valley Farmers Ltd for an individual, (or a partnership or a company or other corporate entity) involves holding either 15 Ordinary Shares, or 15 current Trading Shares issued annually at par.  Holders of Ordinary Shares will have made a 'one off' purchase of them at some time between1961 and the present day, at prices which were increased in stages from £1 to £10 each (roughly in line with inflation) up to the early nineties, but have been static since then.

Trading Shares are issued annually and do not confer any membership rights on the holder other than within the calendar year of issue. 

In practical terms at the beginning of January anyone seeking membership of Mole Valley can obtain this by payment of £15 to apply for 15 Trading Shares.  Subject to satisfactory trade references this will provide the holder with the right to book goods to a credit a/c, receive a monthly Newsletter and an entitlement to attend and speak at General Meetings but not vote.  Residual value of these Shares is limited to a maximum of 10% of issue price payable on death or bankruptcy of the holder. 

Similarly, but subject to the proviso that the applicant is owner or occupant of a registered agricultural holding, the payment of £150 will purchase 15 Ordinary Shares with the additional rights that

The continuing existence of two classes of shareholding within MVF did not give rise to any day to day trading differences between members until the early June ‘07 introduction of a retrospective rebate system, based on farming input purchases from Oct 1st 2006 which excludes holders of Trading shares.  See Memo 8, which advocates review of this breach of previous assurances. 

In addition to Ordinary and Trading Shares there is one Special Share established by an overwhelming vote of approval at an Extraordinary General Meeting of Ordinary Shareholders on the 26th January 1987.

This Special Share has voting power equivalent to all other votes cast at a General Meeting of Mole Valley shareholders plus one more vote.  Use of this power is limited to resolutions related to any proposed change to the MVF Memorandum and Articles of Association if such change may, in the opinion of the Trustees, frustrate the purposes for which the company was established.  Those purposes are defined within the Trust Deed and the preamble to it.  It imposes upon the Trustees an obligation to use the Special Share, which is held in their names, to defeat any resolution which qualifies as above as detrimental to MVF original purposes, particularly amendments to those Articles which protect MVF's continuity “in the form intended by its founders”.  It does not, however, provide any powers for the Trustees to intervene or protect the continuity of MVF from policy changes, if these do not require amendments to MVF's constitution. 

The present Trustees, in alphabetical order, are:-

Ranald Fowler*, past company Chairman and currently Newsletter editor
Mervyn Gay, son of founder Director Alfie Gay
John James*, founder and first Company Chairman, currently Trustee Chairman
Anthony Moore FCA*, head of finance, later MVF Chief Executive, retired on health grounds
David Moore, Mole Valley Director up to 2005
Mervyn Nicholls, currently the only Director of MVF serving also as a Trustee
Brian Peace*, Company Director 1962 – 1997, MVF Chairman 1967 – 1987 
Names marked with * have served as Trustees since the Trust was established 
Current MVF Chairman, David Burke, attends Trustee meetings by invitation 

Many members will be aware that a Review of MVF's constitution is currently being undertaken in conjunction with Trustees.  As Chairman of Trustees it would, I believe, be improper for me to divulge or discuss any detail of the proposals under consideration. 

Mole Valley Farmers Ltd is a private limited company registered within the provisions of the Companies Acts 1948 et seq.  The ultimate control of such a company lies in the decisions of the majority of its Ordinary Shareholders.  Mole Valley Articles of Association include a number of provisions which, unless amended with Shareholder consent, would constitute obstacles to any predatory take-over advances.  The Special Share adds a further dimension to MVF’s defence mechanism. 

However, it is the recognition by a sufficient proportion of Ordinary Shareholders that MVF is financially more beneficial to their continuing farming (and farmland related) enterprises and households, than the one-off gain from selling their shares, that will ultimately protect the future of Mole Valley. 

I happened to come across a letter I had written to Directors almost 30 years ago, which referred to this issue.  It is quite an interesting reminder of awareness of the problem at that time.  I will quote its conclusions

“Proposition (a) has some merit though I think it has also certain drawbacks.  The advantage of stopping the issue of further Shares in addition to maintaining N.Devon (if not actually S.Molton) control, is that it would enhance the tax-free capital accumulation that we enjoy from Membership Levies which is also inflation-linked.  The disadvantage, as I see it derives from the following fact.  If selling all the assets and after settling up all liabilities, each £30 Shareholding in MVF is worth about £300 at present. In 20 years it could be worth £5000. 

Now it is unlikely that a majority could ever be assembled out of the 1750 (approx) present Shareholders in favour of cashing in their Shares by obtaining control of the Board and winding up the Company.  But the more we restrict the issue of Shares the greater will be the financial incentive for them to do it. 

One thing that we certainly should do is to charge more for Shares (? £50 from Jan 1st.) as at least a step in the direction of bringing them a small way towards their present value. 

This latter point suggests that we ought to discuss this matter at the Directors Meeting on Wednesday of next week.                                           John James  13-12-77”

Explanatory Notes

1.      Membership capital levy (or levy loan) was discontinued in 1998 when Trading Shares were introduced..

2.      The reference to a £30 Shareholding was for 15 Ordinary Shares @ £2 per share at that time.

3.      The 1977 prediction of a £5000 value on wind-up was not a bad guess for 1997!

      4.      A similar calculation for 2007 probably lies between £7500 and £15,000. 

This issue has in recent years become known as the 'Hornets Nest'.  Raising it in 1977 did not result in any remedial action.  30 years later it is even more difficult and will get progressively worse unless the Board takes some action to resolve it. 

Urgent strengthening of Mole valley’s cost-saving performance for its farming shareholders would, at least, be a very useful contribution.

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