Aon Insurance's Move to London: An Example of How Shareholder's Votes Aren't Always Simple Decisions

A month or so ago, Aon Corp. (one of the world's largest insurance brokers) announced that they would move their headquarters from Chicago to London. Even though only a few jobs would be affected, it was considered a blow to Chicago's prestige as an international financial capital.

Aon's board said the decision was made to lower their corporate tax rate and allow them to access $300 million of cash they have outside of the U.S. They made it seem like a simple, cut-and-dry issue.

On the eve of the shareholder vote, however, they had to comply with SEC regulations, and disclose the risks of the move:

1. Some shareholders might get taxed during the switch from a U.S. to U.K. company.

2. The IRS might fight the U.S. to U.K. switch. If Aon lost, the projected cost savings may not occur.

3. The litigation might take so long that, if Aon lost and the U.S. to U.K. move was undone, it might be too late for investors to file an amended 2012 tax return to claim a refund of the taxes from risk #1.

4. Shareholders like companies to buy back stock, but English companies face more restrictions than Delaware corporations for stock buy-backs. For example, they may have to get 75% of shareholders to vote in favor of it.

5. They may not be allowed to continue to pay their dividend until they built up "distributable reserves".

6. Finally, there is the risk that Aon may get removed from the S&P 500.