EQI EQ Grp

RNS Number:2440X
EQ Group PLC
02 April 2004

For Immediate Release                                           2nd April 2004


               Proposed cancellation of the Share Premium Account


eq group plc, the AIM listed marketing services group, announces a proposed
cancellation of its Share Premium Account and has posted a letter to
shareholders.


The letter to shareholders reads as follows:


"Shareholders will be aware that due, primarily, to considerable losses incurred
through the treatment of its investment in TVI Inc, the balance sheet of eq
group plc ("the Company"), as at 31 December 2003, stood in deficit in the sum
of #5.512 million on its retained profit & loss account, preventing the Company
from declaring any dividends. In order to remove this obstacle, the Board
proposes to undertake a capital reduction, whereby the share premium account
will be cancelled and the amount of #7.335 million credited to the profit & loss
account.


The share premium account is treated by law as an undistributable capital
reserve. Consequently, whilst its cancellation is a relatively straightforward
process, it requires the approval of the High Court.


It is the Board's hope that the cancellation will be effected by 30 June 2004,
the date to which the Company's interim accounts are prepared. This would then
enable the Board to declare an interim dividend for 2004, should it decide to do
so, although I should like to make clear to shareholders that there is no
current intention to pay a dividend.


In this letter you will find notice to shareholders of an extraordinary general
meeting of the Company ("EGM"), together with an explanation of the background
to the resolution that is to be proposed at the EGM and a guide to the overall
process and the requirements of the High Court.


Extraordinary General Meeting
You will find notice of an EGM of the Company on the page 4 of this circular.
The EGM is to be held on the same day and date, that is 30 April 2004, and at
the same location, that is the Company's offices at Crossley House, Halifax, as
the annual general meeting of the Company ("AGM"). However, whereas the AGM will
commence at 11.30 am, in accordance with the notice to shareholders onpages 41
and 42 of the annual report and accounts 2003 of the Company ("2003 Accounts"),
this EGM is intended to start as soon as the AGM business has concluded, or at
11.45 am, whichever is the later.


There is a single resolution to be proposed to shareholders at the EGM, namely
that the share premium account of the Company be cancelled ("Cancellation").
More details of this appear below. This resolution will be proposed as a special
resolution.


The decision to put this proposal to shareholders was taken after the 2003
Accounts were prepared, which was in early February 2004, and we decided for
administrative simplicity to convene a separate meeting of shareholders to
propose the share premium special resolution rather than amend the existing
notice of AGM to include this additional item of business.


Background
As shareholders will be aware from the 2003 Accounts, the balance sheet of the
Company as at 31 December 2003 stood in deficit in the sum of #5.512 million.
The share premium account of the Company was in credit in the sum of #7.335
million.


A review of the Company's activities and their performance during 2003 is
contained in our letter to shareholders starting on page 8 of the 2003 Accounts.
Despiteour statement that 2003 was a very positive year for the Company and
that we remain positive about prospects for 2004, the balance sheet of the
Company is burdened by the losses, sustained principally through the Company's
investment in its wholly owned subsidiary TVI Acquisition Inc (later renamed eq
Management Services inc), of Delaware, USA. Your board wishes to address the
impact of this investment on the balance sheet of the Company in order to bring
forward the date upon which the Companywill be able to pay dividends. Whilst
the Company has a deficit on its profit and loss account the payment of
dividends is not possible. It is not the purpose of this letter to speculate on
what future dividend policy may be, but the special resolution to be proposed at
the EGM has as its main objective eliminating the historical accumulated losses
on the profit and loss account of the Company to which we have referred. This is
proposed to be achieved by cancelling the share premium account of the Company
and transferring it to the profit and loss account.


Prior to this, the Company expects to make a further investment in eq Management
Services Inc. to enable it to repay an outstanding bank loan, but that
investment will be written down in the balance sheet of the Company, increasing
the loss on the profit and loss account of the Company. It is anticipated that a
number of the Company's profitable subsidiaries will declare a dividend payable
to the Company. Taking as a starting point the deficit on the profit and loss
account of the Company as shown in its balance sheet as at 31 December 2003, and
making adjustments for these proposed transactions and the Cancellation,
assuming it is approved and ultimately takes effect, theprofit and loss account
of the Company would contain a credit of approximately #1.88 million before any
entries for the trading period commencing 1 January 2004 are recorded there.


Share premium account
Share premium arises on the issue by the Company of shares at a premium to their
nominal value. The premium is credited to the share premium account.


The share premium account is treated by statute as an undistributable capital
reserve except to the extent that its reduction or cancellation is first
approved by shareholders by special resolution and subsequently confirmed by
order of the High Court on the application to the court by the Company. A
cancellation of the share premium account which has been both approved by
shareholders and confirmed by the court takes effect when the court's order is
registered by the Registrar of Companies ("Effective Date").


Accordingly, if the proposed Cancellation is approved by the passing of the
special resolution to be proposed at theEGM, it is the intention of the Company
thereafter to apply to the court for its confirmation.


In order to obtain the confirmation of the court, the Company will need to
demonstrate to the satisfaction of the court that no creditor of the Company who
has not consented to the Cancellation will be prejudiced by the Cancellation.
Based on informal soundings the Company has already made of its principal
creditors, their support in consenting to the proposed Cancellation is
anticipated to be forthcoming.


For the benefit of creditors who do not consent, the Company will be required to
put in place for their benefit security pending the payment by the Company of
sums due to them or the discharge of any contingent obligations to them thatthe
Company may have.


As an alternative to seeking consents from creditors and/or providing security
for their benefit, the Company may undertake to the court to transfer some or
all of the amount of the share premium account to a new special reserve of the
Company, which will also be undistributable, subject to terms as to its future
distribution which are acceptable to the court. If this route is followed, it
will delay the date upon which any part of the share premium account can be
transferred to the profit and loss account of the Company so as to create a
credit on the profit and loss account, as opposed merely to eliminating the
accumulated losses. In those circumstances it is likely that the Company will
discontinue its application to court and abandon the Cancellation. However, your
board will make a decision about that should the circumstances arise, after
reviewing with its advisers the terms of any undertaking to the court that may
be required, and the relevant timescales involved.


The proposed Cancellation does not affect the voting or dividend rights or the
rights on a return of capital of shareholders.

Yours sincerely


Phillip Bennett
Chairman


ENDS

For further information, please contact:

Bob Bond, Chief Executive, eq group plc                       Tel: 07747 032 478

Peter Binns, Binns & Co PR Ltd                                Tel: 020 7786 9600


                      This information is provided by RNS
            The companynews service from the London Stock Exchange

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