Venator Materials (1EC0) Risk Analysis

Shareholder activism, which can take many forms or arise in a variety of situations, has been increasing for public companies and could result in substantial costs to us, divert attention and valuable resource of our Board, management and employees, and disrupt our operations. On January 10, 2023 for instance, we received a letter from an approximately 14.3% shareholder of Venator, J&T MS 1 SICAV (together with its affiliates, "J&T"), which was made publicly available and in which J&T expressed concerns about Venator's financial and share price performance and our business strategy. While we value open dialogue and continue to engage regularly with our shareholders, activist campaigns could be led by shareholders that have interests that are different from the majority of our shareholders and our Board, and may not be in the best interest of Venator. Further, shareholder activism could have an adverse impact on the price of our ordinary shares and give rise to perceived uncertainties as to our future direction, strategy or leadership. Shareholder activism could also adversely affect our relationships with customers and suppliers, may result in the loss of potential business opportunities, may make it more difficult for us to attract new or retain existing investors, customers, directors, employees or other partners, and may impact the manner in which we operate our business in ways we do not currently anticipate. Activist shareholders could also hinder the implementation of strategic initiatives that we are undertaking and may undertake in the future in order to address the near-term challenges to our business. As a result, we may be required to retain additional services of various professionals to advise us in matters related to shareholder activism, including legal, financial and communications advisers, the costs of which may negatively impact our financial results.

If a U.S. person is treated as owning (directly, indirectly, or constructively) at least 10% of the value or voting power of our ordinary shares, such person may be treated as a "United States shareholder" within the meaning of Section 951 of the Code (as define below) with respect to each "controlled foreign corporation." Depending on the amount of United States shareholder ownership of our ordinary shares, we and certain of our non-U.S. subsidiaries may be treated as a controlled foreign corporation for U.S. federal income tax purposes. In addition, since the Company includes one or more U.S. subsidiaries, certain of our non-U.S. subsidiaries could be treated as controlled foreign corporations (regardless of whether or not we are treated as a controlled foreign corporation). A U.S. shareholder of a controlled foreign corporation may be required to report annually and include in its U.S. taxable income its pro rata share of "Subpart F income," "global intangible low-taxed income," and investments in U.S. property by controlled foreign corporations, regardless of whether we make any distributions. An individual that is a U.S. shareholder with respect to a controlled foreign corporation generally would not be allowed certain tax deductions or foreign tax credits that would be allowed to a U.S. shareholder that is a U.S. corporation. Failure to comply with these reporting obligations may subject a U.S. shareholder to significant monetary penalties and may prevent the statute of limitations with respect to such U.S. shareholder's U.S. federal income tax return for the year for which reporting was due from starting. We cannot provide any assurances that we will assist holders of our ordinary shares in determining whether we or any of our non-U.S. subsidiaries are treated as a controlled foreign corporation or whether any holder of ordinary shares is treated as a U.S. shareholder with respect to any such controlled foreign corporation or furnish to any U.S. shareholders information that may be necessary to comply with the aforementioned reporting and tax paying obligations. The IRS has provided limited guidance on situations in which investors may rely on publicly available information to comply with their reporting and taxpaying obligations with respect to foreign-controlled controlled foreign corporations. A U.S. holder should consult its tax advisors regarding the potential application of these rules to an investment in our ordinary shares.

On December 23, 2020, we announced that funds advised by SK Capital closed on the previously announced agreement to purchase approximately 42.4 million shares, representing just under 40% of our outstanding shares, from Huntsman for a purchase price of approximately $100 million. The agreement includes a 30-month option for the purchase of Huntsman's remaining approximate 9.7 million shares it holds. We are not a party to this agreement. On January 4, 2021, we announced the election of three directors associated with SK Capital and the resignation of two members of our Board. As a result of these events, SK Capital may exert significant influence over our business objectives and policies, including whether to continue as a publicly listed company, the composition of our board of directors and any action requiring the approval of our shareholders, such as the adoption of amendments to our articles of association, and the approval of mergers or a sale of substantially all of our assets. This concentration of ownership may also make some transactions, including mergers or other changes in control, more difficult or impossible without the support of SK Capital and could discourage others from making tender offers, which could prevent shareholders from receiving a premium for their shares. SK Capital's interests may conflict with your interests as a shareholder.

Certain members of our Board are associated with SK Capital, which could create, or appear to create, potential conflicts of interest when our directors are faced with decisions that could have different implications for SK Capital and us. The four members associated with SK Capital are Barry B. Siadat, Aaron C. Davenport, Daniele Ferrari and Heike van de Kerkhof. So long as SK Capital beneficially owns ordinary shares representing a significant percentage of the votes entitled to be cast by the holders of our outstanding ordinary shares, SK Capital can exert significant influence over our Board.

Any sales of substantial amounts of our ordinary shares in the public market or the perception that such sales might occur may cause the market price of our ordinary shares to decline and impede our ability to raise capital through the issuance of equity securities. We may issue additional ordinary shares, including any securities that are convertible into or exchangeable for, or that represent the right to receive, ordinary shares or any substantially similar securities. In connection with the IPO and the separation, we and Huntsman entered into a Registration Rights Agreement, pursuant to which we agreed, upon the request of Huntsman, to use our best efforts to effect the registration under applicable securities laws of the disposition of our ordinary shares retained by Huntsman. In connection with its sale of just under 40% of our outstanding shares to SK Capital in December 2020, Huntsman partially assigned the Registration Rights Agreement to SK Capital. Subject to prevailing market and other conditions, any future monetization may be effected in additional follow-on capital markets transactions or block transactions that permit an orderly distribution of SK Capital's or Huntsman's ordinary shares.

We are incorporated under the laws of England and Wales. The rights of holders of our ordinary shares are governed by English law, including the provisions of the Companies Act 2006, and by our articles of association. These rights differ in certain respects from the rights of shareholders in typical U.S. corporations organized in Delaware, including with respect to preemptive rights, distribution of dividends, limitation on derivative suits, and certain heightened shareholder approval requirements.

We are incorporated under the laws of England and Wales. The U.S. and the U.K. do not currently have a treaty providing for the recognition and enforcement of judgments, other than arbitration awards, in civil and commercial matters. The enforceability of any judgment of a U.S. federal or state court in the U.K. will depend on the laws and any treaties in effect at the time, including conflicts of laws principles (such as those bearing on the question of whether a U.K. court would recognize the basis on which a U.S. court had purported to exercise jurisdiction over a defendant). In this context, there is doubt as to the enforceability in the U.K. of civil liabilities based solely on the federal securities laws of the U.S. In addition, awards for punitive damages in actions brought in the U.S. or elsewhere may be unenforceable in the U.K. An award for monetary damages under the U.S. securities laws would likely be considered punitive if it did not seek to compensate the claimant for loss or damage suffered and was intended to punish the defendant.

Certain provisions in our articles of association are intended to have the effect of delaying or preventing a change in control or changes in our management. For example, our articles of association include provisions that establish an advance notice procedure for shareholder resolutions to be brought before an annual meeting of our shareholders, including proposed nominations of persons for election to our board of directors. U.K. law also prohibits the passing of written shareholder resolutions by public companies. In addition, our articles of association provide that we may not engage in a business combination with an interested shareholder for a period of three years after the time of the transaction in which the person became an interested shareholder unless our board of directors, prior to the time of the transaction in which the person became an interested shareholder, approves the business combination or the transaction in which the shareholder becomes an interested shareholder, or under other specified limited circumstances. These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management, even if these events would be beneficial for our shareholders.

In the case of certain increases in our issued ordinary share capital, under English law, existing holders of our ordinary shares are entitled to pre-emption rights to subscribe for such shares, unless shareholders dis-apply such rights by a special resolution at a shareholders' meeting. There is no current dis-application in force, as the existing dis-application has expired, but we intend to propose equivalent resolutions at our next annual general meeting of shareholders. We cannot assure prospective U.S. investors that any exemption from the registration requirements of the Securities Act or applicable non-U.S. securities laws would be available to enable U.S. or other non-U.K. holders to exercise such pre-emption rights or, if available, that we will utilize any such exemption. For more information on the potential issuance of a material number of ordinary shares or securities convertible into our ordinary shares in connection with the strategic review of our business and plan to strengthen our liquidity position and engage our shareholders and debtholders with respect to our capital structure, please see "Risks Related to our Liquidity and Capital Resources-We may not be able to raise additional capital in the future on favorable terms or at all, which could materially adversely affect our financial condition and results of operations. including our inability to continue as a going concern."

Stamp duty or stamp duty reserve tax ("SDRT"), are imposed in the U.K. on certain transfers of chargeable securities (which include shares in companies incorporated in the U.K.) at a rate of 0.5% of the consideration paid for the transfer. Certain issues or transfers of shares to depositories or into clearance systems may be charged at a higher rate of 1.5%. Our shareholders are strongly encouraged to hold shares in book entry form through the facilities of The Depository Trust Company ("DTC"). Transfers of shares held in book entry form through DTC do not currently attract a charge to stamp duty or SDRT in the U.K. A transfer of title in the shares from within the DTC system out of DTC and any subsequent transfers that occur entirely outside the DTC system, will attract a charge to stamp duty at a rate of 0.5% of any consideration, which is payable by the transferee of the shares. Any such duty must be paid (and the relevant transfer document, if any, stamped by HM Revenue & Customs ("HMRC")) before the transfer can be registered in the books of Venator. However, if those shares are redeposited into DTC, the redeposit will attract stamp duty or SDRT at the rate of 1.5% to be paid by the transferor. We have put in place arrangements to require that shares held in certificated form cannot be transferred into the DTC system until the transferor of the shares has first delivered the shares to a depositary specified by us so that SDRT may be collected in connection with the initial delivery to the depositary. Any such shares will be evidenced by a receipt issued by the depositary. Before the transfer can be registered in our books, the transferor will also be required to put the depositary in funds to settle the resultant liability to SDRT, which will be charged at a rate of 1.5% of the value of the shares. As a result of changes in law because of Brexit, we are no longer able to deliver shares directly to the DTC for deposit and clearing within the DTC facilities. Instead, an arrangement is in place whereby the shares are indirectly issued to the DTC through the issuance of shares to a third party depositary nominee, subsequent issuance and cancellation of depositary receipts and transfer of the shares from the depositary nominee to DTC's nominee Cede & Co. for further delivery into the DTC system, a process which is exempt from stamp duty under existing U.K. law. If this arrangement were to be disallowed under U.K. law, then transactions in our securities may be disrupted. The facilities of DTC are a widely-used mechanism that allow for rapid electronic transfers of securities between the participants in the DTC system, which include many large banks and brokerage firms. Our ordinary shares are currently eligible via the method described above for deposit and clearing within the DTC system. We have entered into arrangements with DTC whereby we agreed to indemnify DTC for any SDRT that may be assessed upon it as a result of its service as a depository and clearing agency for our shares. However, DTC generally has discretion to cease to act as a depository and clearing agency for the shares. While we would pursue alternative arrangements to preserve our listing and maintain trading, any such disruption could have a material adverse effect on the market price of our ordinary shares.

We are entitled to rely on a provision in the corporate governance listing standards of the NYSE that allows us to follow English corporate law and the U.K. Companies Act with regard to certain aspects of corporate governance. This allows us to follow certain corporate governance practices that differ in significant respects from the corporate governance requirements applicable to U.S. companies listed on the NYSE. For example, we are exempt from NYSE regulations that require a listed U.S. company to (1) have a majority of the board of directors consist of independent directors, (2) require regularly scheduled executive sessions with only independent directors each year and (3) have a remuneration committee or a nominations or corporate governance committee consisting entirely of independent directors. In accordance with our NYSE listing, our audit committee is required to comply with the provisions of Section 301 of the Sarbanes-Oxley Act and Rule 10A-3 of the Exchange Act, both of which are also applicable to NYSE-listed U.S. companies. Because we are a foreign private issuer, however, our audit committee is not subject to additional New York Stock Exchange requirements applicable to listed U.S. companies, including an affirmative determination that all members of the audit committee are "independent" under more stringent criteria than those applicable to us as a foreign private issuer. Furthermore, the corporate governance listing standards of the NYSE require listed U.S. companies to, among other things, seek shareholder approval for the implementation of certain equity compensation plans and issuances of ordinary shares, which we are not required to follow as a foreign private issuer. While historically we have not utilized any of the above exemptions and believe that we comply with all NYSE corporate governance listing standards applicable to U.S. listed companies, if a material number of ordinary shares are issued in connection with a restructuring or refinancing of our existing debt, including in exchange for existing debt, or to provide additional liquidity, we expect to use the accommodations granted to foreign private issuers by NYSE rules, which permit foreign private issuers not to seek shareholder approval for the issuance of 20% or more of their outstanding ordinary shares, subject to obtaining any required approvals for such ordinary share issuances under English law.