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West Somerset Railway General Discussion

Discussion in 'Heritage Railways & Centres in the UK' started by gwr4090, Nov 15, 2007.

  1. nick813

    nick813 Well-Known Member Loco Owner

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    Re Donating to The WSRA.
    I have re-joined simply to be able to influence future decisions. I might make a difference, I might not make a difference.
    I will do my best to make a difference. I can not do this by sitting outside looking in. I can by sitting inside and look out.
    thanks
     
  2. ikcdab

    ikcdab Well-Known Member

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    Yes it is.
    https://www.west-somerset-railway.co.uk/shareholders
    The issue is that the charity cannot buy the shares because it's a donation to a commercial company. Same goes for the Trust. If I have got the reason wrong, I'm sure I'll be corrected.
    Ian C
     
  3. Jamessquared

    Jamessquared Nat Pres stalwart

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    I don't believe that is correct. An investment in shares isn't a donation (but in any case, charities can donate to commercial companies - though generally they call them "grants"!)

    There are two reasons why a charity might hold (or buy) shares in a commercial company.

    The first is as part of an investment portfolio to generate funds which can be used to further the charity's objectives. Because the WSR Plc will never pay a dividend, that reason wouldn't apply.

    The other reason is if holding the shares allows the charity to influence the policy or strategy of the company in ways that further the objectives of the charity. That is legitimate. (It is known as a "programme related investment").

    An example from another field would be an environmental charity investing in the shares of an oil company so as to gain the right to attend and speak at company general meetings etc. and thereby promote their charitable environmental agenda.

    Disclaimer: IANAL.

    Tom
     
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  4. ghost

    ghost Part of the furniture

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    I stand corrected. Doesn't change the fact that the WSHRT and WSRA do not use their shareholder influence to produce change
     
  5. Lineisclear

    Lineisclear Member

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    It's a complex subject Ian. My understanding is that charities can hold shares in trading companies where they can justify the investment as part of a formal investment policy. That can include investment that enables their voice to be heard at General Meetings of a company that affects their charitable purposes. Using charity funds to purchase shares in a company that can pay dividends ( which the PLC is currently precluded from doing ) is problematic because it involves the investment of charity funds for potential private gain i.e the generation of dividend pay outs to other private shareholders.

    The situation overall does not seem as bleak to me as some recent posters suggest. After all the railway is still operating. Surely the PLC board deserve some credit for that? I will be accused no doubt of being a sycophant so, for the record, I do not agree with a number of decisions the PLC board have made. However I recognise that under the current structure its directors run the railway. Whatever disagreements they may have in private, as is normal in organisations with collective responsibility, their duty in public is to support majority board decisions. That may look like unquestioning obedience but, unless you know what goes on in the boardroom, you have no way of knowing for certain.

    Equally I have no way of knowing what the books look like. However it does seem that future solvency may depend on a successful appeal. If that doesn't succeed then looming insolvency can be an opportunity for re-structuring. It's not unusual for a new company purchaser to offer creditors a better deal than they would get on insolvent liquidation. With that support, the purchaser can acquire the assets and business from the potentially insolvent company. Whether that's attractive to a potential buyer depends on the investment they would need to inject into the business and whether there is a viable business case. That might involve substantial change from the traditional vision of a 26 mile long Great Western branch line. The important point, if that were to transpire, is that the PLC shareholders would be wiped out along with any influence their shareholdings might have conferred. In the current uncertainty for the Trustees to purchase more shares in the PLC would seem highly inadvisable.
     
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  6. Snifter

    Snifter Part of the furniture

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    And sadly neither does the non-subservient charity, as their much requested meeting with the Finance Director was blocked by the current chairman. Today also marks 50 days since the last appeal update hence your recommendation not to purchase shares appears regrettably, to be correct.
     
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  7. 6960 Raveningham Hall

    6960 Raveningham Hall Member Friend

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    The timetables for the WSR Mixed Traffic Gala on September 17th and 18th
    have been added to the (unofficial) wsr.org web site today.
    Many thanks @Steve Edge.
     
  8. dunghill1

    dunghill1 New Member

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    Yes Ian you are wrong as they are not nessarily a donation, such as happened at Midsomer Norton where the trusts share in the company gives them controling voting rights.
     
    Last edited: Sep 1, 2021
  9. Miff

    Miff Well-Known Member Friend

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    It might also depend whether that potential buyer (whether an individual; another business; or perhaps a charity) thought they had a better strategy to encourage more members of the public to donate their money and to retain & recruit enough volunteers. The people willing to offer a stream of free money and free time are perhaps the most valuable assets of the most successful heritage railways.
     
  10. D1039

    D1039 Well-Known Member

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    The last update I saw was 22 days ago on 10th August (£36,021) - although finding the updates can be a challenge and the mid-July one was/is (without checking) the last one linked on the WSR website.

    Patrick


    Sent from my iPhone using Tapatalk
     
  11. Robin Moira White

    Robin Moira White Nat Pres stalwart

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    Inviting the purchase of shares without a prospectus is rather problematical to say the least, IMHLO.

    Robin
     
  12. Snifter

    Snifter Part of the furniture

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  13. Jamessquared

    Jamessquared Nat Pres stalwart

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    There is guidance (not law!) here: https://www.gov.uk/government/publi...s-and-investment-matters-a-guide-for-trustees

    It is indeed complex, but actually few things are absolutely precluded. Charities can give grants, loans or make equity investment to trading companies; and they can in certain circumstances do those things even if in so doing, it results in a potential private gain. The key question is about whether such payments further the interest of the charity.

    It is routinely asserted on this thread that it is not allowed for a charity to make a "donation to a commercial company" (most recently by @ikcdab above). If I had a pound for every time that has been stated on this thread, I'd have my LCDR A class new build nearing completion by now. To those who make that assertion I'd pose a counter question: if charities can't make donations to trading companies, how do you explain all the grants that they routinely offer for specific purposes?

    As always, I would say seek competent advice. But it seems that in Somerset, discussion about the role of charities in supporting the railway inevitably starts with the premise "that can't be done". Turn the question round to "how do we achieve ..." - there is frequently a permissible answer.

    Tom
     
  14. johnofwessex

    johnofwessex Part of the furniture

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    I went on the NNR a couple of days ago
    Surely the fact that the WSRA buying shares in the WSR PLC might give it a level of control has nothing to do with it?
     
  15. Sidmouth

    Sidmouth Part of the furniture Staff Member Moderator

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    But if the body is already a shareholder and wishes to both increase its holding (to protect / enhance its influence) and to support the parent company with additional funding
     
  16. martin1656

    martin1656 Resident of Nat Pres Friend

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    Plus, i can imagine the shenanigan's the PLC would pull, to ensure that the WSRA could never gain enough shares to give it a controlling interest in the PLC, because there are enough independent minded minds who won't blindly follow the plc's with in the WSRA that would ensure change does happen, and those in power not just on the PLC, but possibly on the other bodies might have very good reason to fear for their positions.
     
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  17. 35B

    35B Nat Pres stalwart

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    Leaving personalities to one side, it's clear from events with the WSHRT last year that there's still enough history around the WSRA that anything resembling a "WSRA takeover" would cause ructions.
     
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  18. 61624

    61624 Well-Known Member

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    With regard to the WSRA potentially buying shares, the WSR Plc shareholders will have authorised a certain level of shares to be sold, and some of these may be unsold and available to purchase. A prospectus would be needed to announce a new general, public offering, but there is nothing to prevent a "sophisticated investor" approaching the Plc to buy some or all of the unissued shares. Whether that would be a good idea with the Plc in its present (by their own admission) parlous state is open to debate - I think that there would have to be a viable business plan in place and sufficient shares available to support its implementation. Personally , I doubt whether either exists and that crunch time is fast approaching as the winter fallow period nears.
     
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  19. Lineisclear

    Lineisclear Member

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    Agree.....but I'm not sure the WSRA would qualify as a sophisticated investor. Even if the WSRA is willing to buy it takes two to tango. Why would the PLC want to sell shares if that enhances shareholder ability to demand a change of the board and/or strategy as often suggested on this forum?

    I sympathize with what appears to be a predicament for the WSR Trustees. If they withhold all financial support, and the reported risk of PLC insolvency if the appeal is unsuccessful, is correct, then withholding funds may encourage that outcome. If they were able to acquire further shares and exert pressure for change that might encourage the same result. Why? Because one option is to use likely insolvency to justify to creditors a sale of the assets/ business, but not the company, to a buyer willing to give creditors a better deal than they would get from insolvent liquidation. In those circumstances the PLC shareholders would be wiped out and the WSRA would lose any ability to influence management of the railway via its shareholding. If there is a material risk of insolvency at the time the Trustees use charity funds to purchase what became worthless shares then they might also risk being personally liable to repay the funds involved if a court concluded that no reasonable Trustee should have done so in the circumstances.

    Either way the worst outcome for the WSRA and its members appears to be PLC insolvency. Those advocating the withholding of donations to the PLC appeal might reflect on that.
     
  20. RichardBrum

    RichardBrum Member

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    Shares can be donated...
     

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