Proposed withdrawal of all privately held shares
11 September 2000
The Board of Directors of the Bank for International Settlements (BIS), an international organisation headquartered in Basel, Switzerland, proposes to restrict, in future, the right to hold shares of the BIS exclusively to central banks (which already hold 100% of the voting rights and 86.27% of the property rights in those shares). This measure is intended to enable the BIS to pursue better its objectives of promoting international monetary and financial cooperation.
To this end, the Board has decided to call an Extraordinary General Meeting (EGM) to be held on 8 January 2001 with a view to amending the Statutes of the BIS so as to exclude private shareholders against payment of compensation of CHF 16,000 per share.
The authorities of the stock exchanges in Zurich and Paris, on which BIS shares are traded, have been duly informed of this proposal, and have been asked to suspend all trading in BIS shares during the day of Monday 11 September 2000. Trading will be resumed the next day.
You will shortly find more information on the transaction on the internet site of the BIS (www.bis.org). Alternatively you may also contact the Bank:
|Telephone:||+ 41 61 280 81 88 (press enquiries)|
|+ 41 61 280 81 67 (shareholder information)|
|Facsimile:||+ 41 61 280 90 39|
Communiqué de presse (français)
Rationale for the transaction
The BIS is an international organisation whose fundamental purpose is to promote cooperation among central banks and thus to contribute to global financial stability. The Board of Directors considers that the transaction to be proposed to the EGM is necessary to enable the BIS better to pursue these objectives. Indeed, unlike a commercial bank, the prime objective of the BIS is to employ its resources in support of its public interest functions. This is also reflected in the fact that private shareholders have no right to vote or to participate in the shareholders' meetings. Indeed, all voting rights are held by the central banks of the countries in which the shares were originally subscribed. For these reasons, the existence of a small number of private shareholders, whose interest is essentially financial, is no longer seen to be in line with the international role and the future development of the organisation.
This reform continues the process commenced in 1969/70, when the Statutes of the BIS were amended notably by the creation of a third tranche of its authorised share capital, which could only be subscribed by central banks. Private shareholders currently hold only 13.73% of BIS shares, and there is very little liquidity in either of the two markets on which those shares are traded. This situation is due to several special factors pertaining to BIS shares: the number of shares traded on the markets is very small, shares of the different issues are not fungible, and particular formalities are necessary because the shares are only partly paid up. Furthermore, their transfer is subject to the approval of the BIS and also to that of the central bank of the country in respect of which the shares were issued. These structural impediments, which cannot easily be corrected given the statutory mission of the BIS, render it increasingly difficult to create orderly market conditions for BIS shares.
Information concerning the shares to be withdrawn
The issued share capital of the BIS consists of 529,165 shares, of which 456,517 (86.27%) are currently held by central banks, which moreover hold all voting rights.
The 72,648 (or 13.73%) privately held shares of the BIS (ie shares which are not held by central banks) originate from three non-fungible issues traded on two stock exchanges, as follows:
- 33,078 shares of the American issue, traded in Zurich (on the Nebensegment/marché annexe);
- 16,415 shares of the Belgian issue, also traded in Zurich; and
- 23,155 shares of the French issue, traded in Paris (marché au comptant - valeurs étrangères).
The nominal value of each BIS share is 2,500 gold francs, of which one quarter (625 gold francs) is paid up and the balance can be called up at any time at the discretion of the Board of Directors.
For the reasons described above, the Board of Directors is proposing that the EGM (to be held on 8 January 2001) decide on the withdrawal of all privately held shares in exchange for compensation of CHF 16,000 per share. The Board of Directors has determined this amount of compensation on the recommendation of the international investment bank JP Morgan & Cie SA, which, as the bank advising the BIS in this matter, has carried out the multi-criteria valuation analyses which are customary in this connection. The international accounting firm Arthur Andersen has independently confirmed the fairness of the transaction and in particular of the compensation to be paid to private shareholders.
The amount of compensation reflects a premium of 95%, 105% and 155% for shares of the American, Belgian and French issues respectively over the closing prices for those shares on 8 September 2000.
Legal and tax aspects
From a legal point of view, the transaction is to be conducted pursuant to the special public international law rules applicable to the BIS, which result notably from the Hague Convention respecting the Bank for International Settlements dated 20 January 1930, the Constituent Charter and the Statutes of the BIS. The Board of Directors has decided to call an EGM to be held on 8 January 2001 in order to amend the Statutes in accordance with the rules applicable to the BIS so as to exclude private shareholders against payment of the above-mentioned compensation.
From a tax point of view, given the status of the BIS and the specific nature of the transaction, each private shareholder should consider whether to seek appropriate professional advice with respect to the compensation to be received for each share withdrawn. The relevant rules and tax treatment may vary depending notably upon each private shareholder's residence and personal tax situation, and may differ from the rules applicable to the proceeds from the sale of shares on a stock exchange.
Practical aspects of the transaction
Subject to approval of the Board's proposal by the EGM on 8 January 2001, the operation will be carried out as follows:
- As from 8 January 2001, only central banks will be able to hold shares in the BIS.
- The BIS will cancel the registration of all private shareholders in the books of the Bank without other formality on 8 January 2001; these shareholders will receive the amount of compensation referred to above upon surrender of their share certificates.
- The BIS will take all steps necessary to end the listing of BIS shares on the Zurich (SWX Swiss Exchange) and Paris stock exchanges (ParisBourse SA) with effect from 8 January 2001. Until 5 January 2001, BIS shares will continue to be traded on these two stock exchanges in the same way as hitherto.
- Shares withdrawn from private shareholders will not be cancelled, but will instead be redistributed among central bank shareholders of the BIS, in the manner determined by the EGM.
Information for shareholders
Each private shareholder recorded in the books of the BIS will be sent shortly by mail a note describing the transaction in detail. This note will be available in English, French and German from the Bank for International Settlements, Postfach, CH-4002 Basel (Switzerland), as well as on the internet site of the BIS at www.bis.org. It will also be available from JP Morgan & Cie SA, 14, Place Vendôme, F-75001 Paris, and JP Morgan Securities Limited, Dreikönigstrasse 21, CH-8002 Zürich.
As soon as the EGM has voted on the proposals of the Board, a notice will be sent to all private shareholders recorded in the books of the Bank containing specific information in connection with the withdrawal of share certificates and the payment of compensation.