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What is "indemnity" in a share transaction?

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hellkat
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PostPosted: 17:26 - 18 Dec 2020    Post subject: What is "indemnity" in a share transaction? Reply with quote

I'm administering hubbo's estate (no will Rolling Eyes), such as it was, which has been quite straightforward, closing bank accounts etc. But I have started the process to transfer his shares into our daughter's name. There aren't many, just one of those windfall things that happened from time to time when companies went public.

But I haven't been able to find the original share certificates (other than a couple which were created with the dividend reinvestment arrangement I set up for him). So I told them I couldn't find them.

And in fact they could be almost anywhere, as he was sleeping rough for a while, about 5 years ago, and his belongings went every which way, in between sleeping on various people's sofas and a couple of spells in homeless shelters and winter respite in churches.

The letter says that it will cost me 29 quid in admin fees to get them replaced, no problem with that. But then it says something about indemnity and cover for them and says the fee will increase to £66.

I understand that I am signing a letter indemnifying them against any old certificate/s ever showing up. Although what that entails I am not entirely sure.

But I don't understand the wording which says :

"Because of the value of the shares, cover is needed to support the indemnity. We can provide cover for ourselves, in which case the total fee will increase to £66.20, based on the current share price. This may change if the share price goes up. If you prefer you can make your own arrangements to have the indemnity form guaranteed by a suitably authorised bank, insurance company or guarantee society."

I am presuming that giving them a cheque for £66.20 will solve the worst of the problem, but I don't understand WHY I am paying the extra 35 quid. Is it an insurance policy against someone finding the old share certificates and attempting to cash it in?

And if so, then surely it will not be much longer than a week or so until they are transferred into Anita's name anyway, and any attempt to do so in the original name would just get rejected?

If this then is the case:
1. Why can I not just pay the £29.20 and take the risk that nobody is going to find the certificate this side of Christmas and try to cash it in.
2. Am I correct in my understanding of the purpose of the "cover" they are arranging for themselves. Am I really paying £35 (its not that I begrudge it or can't afford it, I just want to understand it).
3. Why do they cover themselves, and not me as well?
4. Even if I didn't want to pay them the £35 quid extra, how or who or why would I want to get someone else to provide "cover"?

It's a mystery to me. But I am doing my best to understand the mechanisms behind it, so that I don't come unstuck and so that Anita has the shares in her name asap.
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Pete.
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PostPosted: 20:16 - 18 Dec 2020    Post subject: Reply with quote

Going by THIS I'd pay the extra 35 and sleep easy.
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Freddyfruitba...
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PostPosted: 20:30 - 18 Dec 2020    Post subject: Reply with quote

I don't have an answer I'm afraid; but isn't it the case that share certificates have intrinsic value, like bank notes? So what would happen if, say, while sleeping rough your ex had handed them over to someone in exchange for a bed for a few nights or something, and then at some point in the future, after your daughter had claimed ownership and had them transferred into her name, that hypothetical person was to come out of the woodwork with the original certificates and say 'oi, these are legit mine'?

I'm guessing that would give rise to all sorts of issues which would need resolving, so maybe that's what the indemnity is all about?

(Boring background - I'm in a vaguely comparable situation myself, in that I'm a beneficiary of a will which is currently being sorted out. As part of the standard process, the solicitors (who are executors) put an arse-covering advert in the newspaper asking anybody who the deceased may have owed money to, to make themselves known. As a result of this, some builder has popped up with an unpaid bill from 4 or 5 years ago for about £1K, which the deceased had apparently refused to pay because she said the work had been ballsed up. The solicitor has told the builder to take a hike, but there remains the possibility that he could still 'go legal' at some point and sue, which would mean either defending it or just rolling over and paying up to make it go away, either way racking up costs to the estate. That means the will can't yet be fully wound up, and - finally, here's where this story is relevant! - the solicitor has advised that it's possible to pay for some sort of indemnity policy against the builder coming back in the future and taking the matter further, which means that if we pay for the policy the estate can be wound up.)

Have to say that maybe there are better places online than BCF for getting advice on this sort of stuff?! Laughing
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hellkat
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PostPosted: 21:12 - 18 Dec 2020    Post subject: Reply with quote

Yes there undoubtedly are.
But I like to test the wind, so to speak.
See where opinions flow, etc.
Gives the livelier minds something different to think about for a change, ya know Laughing

I had pretty much came up with the same conclusion as yourself in respect of the meaning. I wasn't particularly bucking at paying the [fee/premium] but I just wondered how whatever you're paying for, worked.

Your case study is interesting. Thumbs Up
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hellkat
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PostPosted: 21:53 - 18 Dec 2020    Post subject: Reply with quote

Pete. wrote:
Going by THIS I'd pay the extra 35 and sleep easy.

That's pretty much the same as what they've sent me to sign.
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Polo
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PostPosted: 22:08 - 18 Dec 2020    Post subject: Reply with quote

Does your daughter want the shared as opposed to just flogging them? I administered my dad's estate and his was intestate too. I just sold them at market rate and transferred to me ma. But as already stated, pay the extra, not worth the fuss otherwise.
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hellkat
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PostPosted: 22:18 - 18 Dec 2020    Post subject: Reply with quote

Yeah she decided she might as well hang onto them for a bit, based on the fact that he died just as we went into lockdown, and the markets nosedived. No doubt there's a bit of sentimentality in there, too, even though he was difficult, he was still her dad.

So although they're worth fuck all in the grand scheme of things, its prolly better to let them find their own level (post corona-crisis) and let the dividend reinvestment thingie work its magic until she fancies cashing them in. It's not costing her anything (once I pay this, hopefully last cost) and its a sort of guaranteed cushion for her if she needs it, which is all I really wanted to achieve for her.

I probably broke even on settling the estate, but as long as the shares end up in her name, then it doesn't matter. He hasn't cost me much more than time, which fortunately I had plenty of.
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