An ever increasing number of shareholders own fractional or small shares of CIRI stock. Between September 1999 and September 2011, there was a 142-percent increase in the number of shareholders with one share or less.
The increase in shareholders owning fractional shares is due primarily to shareholders passing away without a valid will on file for their CIRI shares, or who pass away without updating their wills after gifting some of their CIRI shares away or after a beneficiary named in the will dies. Fractional shares create a disproportionate increase in administrative cost and burden to your Company. The cost to send newsletters and other mailings to someone who owns less than one share is the same as sending those same items to shareholders with a larger number of shares. But the owners of fractional or small shares often fail to keep a current mailing address on file, vote in CIRI elections or cash their dividend checks.
Without action, fractional share interests would continue to get smaller over time, while the number of fractional shares and the associated administrative costs would increase. Fortunately, Alaska law not only authorizes corporations to institute requirements that limit the transfer and issuance of its stock to whole shares, but by statute encourages the issuance of whole shares. The majority of the ANCSA regional corporations have never allowed–or passed resolutions to disallow–fractional shares. At its October 2011 meeting, the CIRI Board of Directors passed a resolution to do the same.
The resolution approved by the Board established a policy, effective June 1, 2012, to freeze CIRI’s existing fractional shares by: 1) prohibiting fractional shares from being further divided; and 2) prohibiting single shares from being split. Based on the new policy, CIRI shares shall be allocated based on the following guidelines and processes:
Existing fractional shares: CIRI will only make transfers of fractional shares that existed on June 1, 2012; however, such fractional shares of stock may not be further divided.
Thus, if a fractional share is to be transferred via a valid will, and if such transfer would not further divide the fractional share, the transfer will occur. However, if following the transfer instructions would result in further dividing the fractional share, the allocation of the entire fractional share shall instead be made to a single recipient based on the results of a random drawing conducted by CIRI from the persons named in the transfer instructions.
If the prior holder did not leave a valid will, then the allocation of the entire fractional share shall be made to a single recipient based on the results of a random drawing conducted by CIRI from the names of the spouse, if applicable, and of eligible recipients beginning with the generation closest to the deceased shareholder.
Disposition when there are less shares than heirs: A whole share of stock may not be further divided in order to make a transfer.
Instead, if the transfer is being made pursuant to a valid will with more named recipients than whole shares, the shares shall be allocated based on the results of a random drawing conducted by CIRI from the persons named in the transfer instructions, such that whole shares are distributed to as many of the eligible recipients as possible without the creation of new fractional shares.
If the prior holder did not leave a valid will, one-half of the whole shares shall be distributed to the spouse (as required by law). The remainder of the whole shares shall be allocated based on the results of a random drawing conducted by CIRI from the names of eligible recipients beginning with the generation closest to the deceased shareholder, such that whole shares are distributed to as many of the eligible recipients as possible without the creation of new fractional shares. A second random drawing shall be conducted by CIRI from the names of the winners of the first drawing to determine the sole recipient of any fractional shares.
If the prior holder did not leave a valid will and there is no spouse, the same process is followed except that 100 percent of the shares are allocated based upon the results of the drawing versus the remaining 50 percent.
Disproportionate allocation of shares (e.g., 100 shares and three heirs):
If the transfer is being made pursuant to a valid will, regardless of the prior holder’s instructions, in instances where an allocation of shares would result in the creation of new fractional shares, CIRI shall instead allocate all fractional portions to a single recipient based on the results of a random drawing conducted by the Corporation from the names of eligible recipients.
In cases of intestate succession, where an allocation of shares would result in the creation of a new fractional share, CIRI shall instead allocate the fractional portion to a single recipient based on the results of a random drawing conducted by CIRI from the names of the spouse, if applicable, and of eligible recipients beginning with the generation closest to the prior holder.
Inter-vivos transfers: On or after June 1, 2012, CIRI may only make inter-vivos transfers of stock in whole share increments. Notwithstanding the foregoing, the holder of existing fractional shares shall be allowed to make an inter-vivos transfer of all of his or her fractional shares to one recipient, provided that at least one whole share of stock is transferred to that recipient at the same time the fractional share gift is made or the holder owns less than one share of stock and is transferring all of his or her fractional shares.
CIRI’s new policy was crafted such that, in cases of intestate succession, wherever possible, eligible beneficiaries of fractional shares or whole shares that would otherwise have been split will be limited to the generation closest to the deceased shareholder. This is consistent with Alaska’s intestacy laws and increases the likelihood of consolidating fractional shares with existing shareholdings and/or of distributing greater numbers of shares per recipient. The new policy also provides for random drawings to select a new recipient if a previously selected recipient either fails to turn in the required documentation or cannot be located within a reasonable amount of time, despite good faith efforts made by CIRI.
In light of the new policy, CIRI shareholders are encouraged to consider whether their stock wills need to be updated. Shareholder Relations staff will continue to be available to assist shareholders in completing stock wills at CIRI events, and shareholders may also visit the department to update their wills. Additionally, CIRI stock wills and instructions are available on the CIRI website at www.ciri.com and the forms may also be requested from Shareholder Relations.
Important note: Whether or not an individual is a CIRI shareholder has no bearing on his or her eligibility for services or programs offered through CIRI’s family of nonprofit organizations. Direct lineal descendants of original CIRI shareholders are eligible to receive scholarships and grants from The CIRI Foundation regardless of whether or not they themselves are CIRI shareholders. Alaska Native individuals residing in the Cook Inlet region may establish eligibility for services and programs administered by the remaining CIRI-affiliated nonprofits via a Certificate Degree of Indian Blood issued by the Bureau of Indian Affairs.