Next has called an emergency shareholder meeting after it emerged that the company paid dividends on four occasions without informing Companies House that it had the money.
A group of 11 shareholders came forward to say that they had written to Next, as well as several other FTSE 100 companies, in October 2014 asking for clearer financial reports on what could be paid to shareholders, known as “distributable reserves”.
However, the company went on to make a further three dividend payments without informing Companies House that it had cash reserves at the time.
“The issue in question for this general meeting concerns the filing at Companies House of relevant accounts which demonstrate distributable reserves,” the fashion chain said. “The questions that had been previously been raised was around clarity of disclosure in accounts.”
Clarity is exactly the overarching issue here, according to Natasha Landell Mills, Head of Stewardship at Sarasin & Partners and Co-ordinator of the shareholder group that wrote to Next in 2014.
“I am not sure why they are distinguishing between their disclosures to investors in their accounts and the accounts they file at Companies House. Of course, it is important that accounts at filed at Companies House but the point is that distributable reserves must be shown to shareholders too.”
Having failed to inform shareholders of these funds, Next will now have to answer to them. 12,000 shareholders were contacted for the upcoming meeting, which will take place on Wednesday. The company has also hired UBS and Allen & Overy, a member of the ‘Magic Circle’ of top British law firms, to represent it on the matter.
In regards to the meeting, Next informed Pension & Investment Research Consultants Ltd (PIRC)that it would cost less than 0.1% of the annual budget, which last year amounted to £635, 000. A spokesperson for the company later clarified that the cost would more likely be much lower.