Council of Forte faces uncomfortable decisions

That august body, the Council of Forte, may, after all, be forced to determine the outcome of the bitter pounds 3.2bn battle for control of Forte. After taking advice, tested in the courts, the Council finds itself in the uncomfortable position of having to exercise archaic powers which give its tiny fraction of the company's capital more than 50 per cent of the voting rights. There is, it is understood, no possibility of the Council standing aside and allowing other shareholders to decide, as happened in the last assault on Forte. What this means is that if Lord Callaghan and his colleagues on the Council decide not to sell to Granada, the bid is finished regardless of the views of other shareholders.

So far the stock market appears not fully to have appreciated this. Plainly, the Council's position is a ridiculous and indefensible one. Other Forte shareholders are certain to find the idea that an institution with less than one per cent of the shares is in a position to overrule their collective power completely unacceptable. Unfortunately for them it can, and unless Granada comes up with a very substantial premium for the Council's shares, it fully intends to. Council members no doubt share the common sense view that the majority should decide, but the fact of the matter is that they have no legal duty to other shareholders.

The Council's origins lie deep in the temperance roots of the old Trusthouse chain of hotels. Its purpose was to ensure that the hotels sold food, as well as more lucrative booze, for the hungry traveller. Such powers of enforcement are rarely needed these days but the Council has a parallel duty as a charitable trust. In bid situations, there is a fiduciary duty to get the best possible price. Since the Council has control, its shares should command a massive premium over the price being offered to others, is the advice that has been given. The Council meets tomorrow to decide what that premium should be.

The Takeover Panel has little guidance to offer in such circumstances. Where there are two classes of share, the two offers are meant to be comparable; the premium offered on one class of share should be no more than the premium at which they were trading before the bid. The comparability rule provides no help in this case, however, since the Council's shares have never traded and no value has therefore been put on its controlling position.

So what's it worth? More than pounds 300m according to the most hawkish view since that would represent half the 20 per cent premium Granada is offering for control. That's quite something for a stake nominally worth less than pounds 3m and is plainly a non starter. The Council may nonetheless feel obliged to go for a sum which adds significantly to Granada's bid costs.

Council members must be hoping that Gerry Robinson does what many commentators are urging him to and withdraws gracefully. Otherwise the unprecedented position they find themselves in could turn into a rather embarrassing one.

Competing for a slice of pounds 20bn

More than two million people must decide within the next few months what to do with the savings and tax-free interest accumulated over the last five years in Tessa accounts. Something like pounds 20bn is available for reinvestment and redeployment; the competition for a slice of this is the nearest thing the UK has yet seen to a full-blown price war in the market for savings.

Inertia favours the Tessa providers, who have been trying to persuade holders to roll their capital forward into a new Tessa. Typically, Tessa investors are traditional savers, most at home with banks and building societies. Relatively few are comfortable with the idea of taking risk. Most have learned to be suspicious of financial salesmen and the commissions and management charges levelled. In all but highly performing funds, investment returns are significantly reduced.

Even so, the biggest challenge to Tessas comes from personal equity plans, which offer tax-free investment with the prospect of better returns and some risk. Six months ago it looked as if the main competitor would be corporate bond funds held in Peps. They offer returns of up to 8 per cent combined with a moderate risk of capital profit or loss. But many providers charge a fee to join, a fee to exit the fund and an annual management charge, all of which significantly reduces the return.

Now it looks as if the main challenge will be from Peps invested in shares, and specifically shares which track the performance of the stock market as a whole. Tracker funds are cheap to run because they need fewer analysts and managers.

Recognising this, Fidelity, the American-owned investment group, has just launched a new fund on which there is no entry charge, no exit charge and the annual charge is just 0.5 per cent. Legal & General has replied by trimming its own charge to equal Fidelity's, and Virgin has indicated it will shortly follow suit. Future investment performance cannot be guaranteed. But over the last few years trackers have performed better than most managed unit trusts. Low-charging trackers look like becoming the all too bleak future for many fund managers. Good news for us though.

Tax changes that cut no ice

Labour calls it a tax bombshell, pointing to a hidden tax hike of pounds 850m. The government presents it as part of a modernising drive to simplify the tax system which will help the self-employed. Both are firing off target - but it is hard to see how the self-employed stand to benefit from the introduction of self-assessment and the associated shift in the basis of assessment of tax liability from previous to current year.

One interpretation of the changes is mistaken; thanks to cushioning transitional arrangements, the self-employed will not have to pay two years' tax in one. However, the new regime will undoubtedly yield more income for the Inland Revenue, since the self-employed will no longer be years in arrears. This accounts for at least part of the pounds 850m increment in revenue; the rest will be paid only if the self-employed businesses turn out to grow in profitability as much as the Treasury hopes.

Set against the blow of having to pay tax on the nail are alleged gains from simplifying the tax system. Some hope. One leading firm of accountants, Ernst & Young, has already called for the countdown to current year assessment for the self-employed to be halted. Philip Davis, their expert on self- assessment, says that the new system is no simpler than the previous one.

The administrative convenience may impress ministers but is unlikely to cut much ice among the ranks of the self-employed whose interests they claim to hold so dear. On the other hand, Labour's campaign would be less self-serving if it pledged to revert to the previous system of assessment in arrears - something on which it remains conspicuously silent. Surprise, surprise.

More than 90 years of car history are coming to an end with the abolition of the paper car-tax disc
newsThis and other facts you never knew about the paper circle - completely obsolete today
people'I’d rather have Fred and Rose West quote my characters on childcare'
Life and Style
The new Windows 10 Start Menu
Arts and Entertainment
There has been a boom in ticket sales for female comics, according to an industry survey
comedyFirst national survey reveals Britain’s comedic tastes
Bruce Chatwin's novel 'On the Black Hill' was set at The Vision Farm
travelOne of the finest one-day walks you could hope for - in Britain
footballManchester City 1 Roma 1: Result leaves Premier League champions in danger of not progressing
Arts and Entertainment
Gay and OK: a scene from 'Pride'
filmsUS film censors have ruled 'Pride' unfit for under-16s, though it contains no sex or violence
Life and Style
Magic roundabouts: the gyratory system that has excited enthusiasts in Swindon
motoringJust who are the Roundabout Appreciation Society?
Arts and Entertainment
Hilary North's 'How My Life Has Changed', 2001
booksWell it was good enough for Ancient Egyptians and Picasso...
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Trust Accountant - Kent

NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...

Graduate Recruitment Consultant - 2013/14 Grads - No Exp Needed

£18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...

Law Costs

Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...

Day In a Page

Ebola outbreak: The children orphaned by the virus – then rejected by surviving relatives over fear of infection

The children orphaned by Ebola...

... then rejected by surviving relatives over fear of infection
Pride: Are censors pandering to homophobia?

Are censors pandering to homophobia?

US film censors have ruled 'Pride' unfit for under-16s, though it contains no sex or violence
The magic of roundabouts

Lords of the rings

Just who are the Roundabout Appreciation Society?
Why do we like making lists?

Notes to self: Why do we like making lists?

Well it was good enough for Ancient Egyptians and Picasso...
Hong Kong protests: A good time to open a new restaurant?

A good time to open a new restaurant in Hong Kong?

As pro-democracy demonstrators hold firm, chef Rowley Leigh, who's in the city to open a new restaurant, says you couldn't hope to meet a nicer bunch
Paris Fashion Week: Karl Lagerfeld leads a feminist riot on 'Boulevard Chanel'

Paris Fashion Week

Lagerfeld leads a feminist riot on 'Boulevard Chanel'
Bruce Chatwin's Wales: One of the finest one-day walks in Britain

Simon Calder discovers Bruce Chatwin's Wales

One of the finest one-day walks you could hope for - in Britain
10 best children's nightwear

10 best children's nightwear

Make sure the kids stay cosy on cooler autumn nights in this selection of pjs, onesies and nighties
Manchester City vs Roma: Five things we learnt from City’s draw at the Etihad

Manchester City vs Roma

Five things we learnt from City’s Champions League draw at the Etihad
Martin Hardy: Mike Ashley must act now and end the Alan Pardew reign

Trouble on the Tyne

Ashley must act now and end Pardew's reign at Newcastle, says Martin Hardy
Isis is an hour from Baghdad, the Iraq army has little chance against it, and air strikes won't help

Isis an hour away from Baghdad -

and with no sign of Iraq army being able to make a successful counter-attack
Turner Prize 2014 is frustratingly timid

Turner Prize 2014 is frustratingly timid

The exhibition nods to rich and potentially brilliant ideas, but steps back
Last chance to see: Half the world’s animals have disappeared over the last 40 years

Last chance to see...

The Earth’s animal wildlife population has halved in 40 years
So here's why teenagers are always grumpy - and it's not what you think

Truth behind teens' grumpiness

Early school hours mess with their biological clocks
Why can no one stop hackers putting celebrities' private photos online?

Hacked photos: the third wave

Why can no one stop hackers putting celebrities' private photos online?