Open Orphan plc distribution in specie of Poolbeg Pharma plc shares – Q&A

Open Orphan distribution in specie shares and in particular some people had been concerned that they were unable to trade them.

In addition, even Interactive Investors were confused and had been telling their ISA investors that these shares were not ISA qualifying and would need to be removed from their ISA account.

However, we have clarified with Interactive Investors and a number of the other online trading and ISA providers that the Poolbeg distribution in specie shares are certainly ISA qualifying and are tradeable after the end of lock-up.

The Company can confirm based on advice received that if a shareholder held Open Orphan plc shares in an ISA account on the ex-dividend date (17 June 2021), the resulting Poolbeg Pharma distribution in specie shares should be directed to and held in your ISA account after 19 April 2022 when they are released from a lock-in at which point in time they will be fully tradeable like any other plc share.

This dividend income received into your ISA is treated the same way as any other exempt income generated from your ISA qualifying investment.

When will I receive my share certificate?

The Poolbeg Pharma shares received are subject to a lock-up period that ends on 19 April 2022. Within 14 days of that date, shareholders will be sent a certificate for their distribution in specie shares. Shareholders will then have the option to dematerialise the shares and hold via CREST.

If your Open Orphan plc shares that gave rise to the entitlement to the distribution in specie shares are held in a nominee account, the share certificate will be sent to your broker who can add these to your account.

There has been some confusion among some investors enquiring whether these locked-up distribution in specie shares can currently be traded. Please note that these shares cannot yet be traded because they have not yet been transferred from the nominee (Croft Nominees Ltd) where they are being held in trust during the lock-up period. After the end of the lock-up period when the shares have been transferred, they will then be fully tradeable like any other public company share.

Why aren’t the shares in my online trading account?

As explained above, during the lock-up period the legal title to the shares are held by Croft Nominees Limited. The underlying shareholders retain the beneficial ownership of the shares. Shareholders with online trading accounts should see their future entitlement on their online platform but they cannot be traded and will show no value until after the end of the lock-up period when the shares will be transferred.

Therefore, as per above, you cannot trade shares that you are not yet in receipt of, but after the end of the lock-up period when the shares have been transferred, they will be fully tradeable like any other public company share.

Who are Croft Nominees Limited?

Croft Nominees Limited, is an entity controlled by the lawyers to Open Orphan and Poolbeg Pharma, DAC Beachcroft. DAC Beachcroft were appointed by Open Orphan and Poolbeg Pharma to act as custodian for the nine-month post IPO lock-up of Poolbeg Pharma shares. This appointment is to help facilitate the practical enforcement of the lock-up restrictions.

Within 14 days post the end of the lock-up, Croft Nominees will no longer hold any of these shares, as their sole function was to act as a holding nominee which is standard practice in these types of transactions.

Why is there a lock-up period?

The lock-up period is intended to contribute to the creation of an orderly market for a period after Poolbeg Pharma’s admission to trading on AIM. Poolbeg Pharma’s admission to AIM took place on 19 July 2021. Such lock-up periods can vary from 3, 6, 9, or 12 months in length and the Company took the decision to lock-up shareholders for a 9-month period.

Will there be tax on the distribution in specie shares?

The following comments are intended only as a general guide, shareholders are encouraged and recommended to seek their own financial tax advice.

A. UK resident shareholders:  The distribution in specie shares issued to shareholders as part of the demerger from Open Orphan are treated as a distribution for UK tax purposes, which could be taxable as dividend income. However, as advance clearance for a statutory demerger was obtained from HMRC, the distribution is exempt for UK income tax purposes, and hence there should be no UK income tax liabilities for UK resident shareholders upon receipt of these distribution in specie shares.

Disposal of the distribution in specie shares by UK resident shareholders will be subject to capital gains tax if a chargeable gain is made. The capital gains tax base cost is close to nil (0), therefore nearly the full consideration will be subject to capital gains tax.

There has been some confusion around the base cost and some shareholders thought that the base cost for these shares might be 6p, however, we can clarify that the base cost for capital gains purposes is close to nil because no consideration was paid for the receipt of these shares.

B. UK resident shareholders with shares held in an ISA:

Open Orphan plc and Poolbeg Pharma plc ordinary shares are ISA qualifying investments.

The Company can confirm based on advice received that if a shareholder held Open Orphan plc shares in an ISA account on the ex-dividend date (17 June 2021), the resulting Poolbeg Pharma distribution in specie shares should be directed to and held in your ISA account after 19 April 2022 when they are released from lock-up. This dividend income received into your ISA is treated the same way as any other exempt income that was generated from your ISA qualifying investment.

As with all ISA held shares, should you sell your dividend in specie Poolbeg shares, there will be no tax payable if the proceeds remain within your ISA account.

In addition, if these distribution in specie Poolbeg shares remain within the ISA, they do not form part of the £20k annual ISA allowance as they result from a distribution from an existing ISA shareholding.

We fully understand that there had been some confusion among some of our investors and also potentially among some of the ISA online account managers, but we can confirm that shareholders should have no issue retaining Poolbeg Pharma dividend in specie shares within a qualifying ISA account.

C. Ireland resident shareholders: Advice has been obtained from professional advisors in Ireland who have confirmed that there should be no Irish income tax liabilities as a result of the issue of the distribution in specie shares as part of the demerger. The receipt of dividends could be subject to Irish income tax, and independent advice should be sought.

Disposal of the distribution in specie shares by Irish resident shareholders will be subject to capital gains tax if a chargeable gain is made. The capital gains tax base cost is close to nil, therefore nearly the full consideration will be subject to capital gains tax. There has been some confusion around the base cost and some shareholders thought that the base cost for these shares might be 6p, however, we can clarify that the base cost for capital gains purposes is close to nil because no consideration was paid for the receipt of these shares.

D. Non-UK and Non-Irish resident shareholders: May be subject to tax on dividend income under any law to which they are subject to outside the UK. In addition, they may be subject to tax on a future disposal of shares under any law to which they are subject to outside the UK. Such shareholders should consult their own tax advisers concerning their tax liabilities.

What is the base cost for tax purposes if distribution in speice Poolbeg Pharma shares which are not held in an ISA?

If a UK resident shareholder sells their Poolbeg Pharma distribution in specie shares there will be capital gains tax payable, however as stated above, there will be no income tax due on receipt on these shares. The base cost for capital gains calculation purposes will close to nil (0), therefore nearly the full consideration will be subject to capital gains tax.

There has been some confusion around the base cost and some shareholders thought that the base cost for these shares might be 6p, however, we can clarify that the base cost for capital gains purposes is close to nil because no consideration was paid for the receipt of these shares.
Please note, no capital gains or other tax will be due until the taxpayer sells the Poolbeg Pharma shares in the first instance.

How does general meeting voting work for distribution in speice shareholders?

Poolbeg Pharma and Croft Nominees Limited have organised for distribution in specie shareholders to vote in its upcoming AGM via Poolbeg Pharma’s share registrars, SLC Registrars Limited. Shareholders have been sent a Form of Direction to vote which should be returned to the registrars. This document and all other documents relating to the AGM can be found here: https://www.poolbegpharma.com/investors/documents/ 

How many shares are received for holdings in Open Orphan?

Open Orphan shareholders who were on the register at close of business on 17 June 2021 were allocated shares using a ratio of 1 Poolbeg Pharma share for every 2.98 ordinary shares held in Open Orphan.

What is the ongoing relationship between Open Orphan and Poolbeg Pharma?

Open Orphan and Poolbeg Pharma are non associated companies that are run independently of each other, both are listed on the AIM market of the London Stock Exchange with independent boards and management teams. There is a number of cost synergies including shared office space and shared staff costs.

For further information, please read the following demerger update announced by Open Orphan on 17 June 2021:
https://www.investegate.co.uk/open-orphan-plc–orph-/rns/demerger-update/202106170700091713C/

Cathal Friel, Executive Chairman of Open Orphan

For further information please contact:

Open Orphan plc

+353 (0) 1 644 0007

Cathal Friel, Executive Chairman

Yamin Khan, Chief Executive Officer


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