Members Voluntary Liquidations for Venture Capital Trusts
A particular specialism for Antony Batty and Company in which we reduce costs and the Liquidator’s risk
In this article we detail our specific expertise of winding up Venture Capital Trusts (VCTs) using a method of working we have developed which reduces the Liquidator’s risk and the cost of the liquidation process. As Antony Batty comments: “our highly qualified team has the experience to deal with the complexities that members voluntary liquidations of VCTs often present.”
Along with the Travel Industry, Charities and AIM listed companies, the solvent winding up of Venture Capital Trust (VCTs) using Members Voluntary Liquidations is a particular specialism of ours. We have a great deal of experience and expertise in this specialist area, most recently with the appointment of two of our Licensed Insolvency Practitioners, Antony Batty and Hugh Jesseman, as joint liquidators of Chrysalis VCT PLC, a generalist VCT
The Members Voluntary Liquidation Process for Venture Capital Trusts
A Venture Capital Trust (VCT) is a company listed on the London Stock Exchange, which raises money from investors and uses it to invest in young, innovative, and often privately-owned companies. The government wants to help such companies grow, so it offers VCT investors generous tax relief. VCTs were introduced in 1995 and more than £8.4 billion has been invested by them since then.
Like any solvent company that comes to the end of its useful like, VCTs (which have minimal assets or long-term illiquid assets) can be wound up effectively and cost-efficiently using the Members Voluntary Liquidation procedure. However, the ongoing management fees and market listing fees of such VCTs may be uneconomic. Our method of working overcomes these issues.
The Antony Batty and Company method of working reduces risk and costs
The major issue with the MVL process for VCTs is responsibility for ongoing investment management and trading decisions. On appointment, a Liquidator becomes responsible for any Company to which he/she is appointed. Whilst Boards of Directors remain in office, they lose their agency powers.
As Liquidation appointments are personal appointments, Liquidators must be extremely cautious and generally seek independent advice regarding asset realisations. However, this can be expensive in the context of a VCT, and it could also increase the risk of shareholder challenges, as shareholders have specifically chosen an investment manager when investing in a VCT.
As Antony Batty says, to overcome these issues,
“…we have developed a method of working which we believe minimises the Liquidator’s risk and the costs of the Liquidation process and leaves responsibility for investment management decisions with the existing investment manager.
We achieve this by replacing the Board with a Supervisory Committee (this would generally be formed by existing Board members) who make recommendations to the Liquidator based on advice from the investment manager.”
At the same time as seeking a resolution from shareholders to wind up the VCT and to appoint a Liquidator, further resolutions are sought that:
- The Liquidator be authorised act on recommendations from the Supervisory Committee and the Investment Manager, and that
- The Liquidator will not be required to obtain independent advice in relation to the winding up the portfolio and will not have any liability for acting on recommendations of the Supervisor Committee or Investment Manager.
We also seek a resolution enabling the distribution of asserts in specie. This enables any remaining investments to be distributed.
Costs are significantly reduced
Obtaining the above resolutions from shareholders which limit the Liquidator’s liability and enable the existing VCT decision structure to remain in place, significantly reduces the involvement of the Liquidator in the investment realisation process and accordingly costs.
The Liquidator does however remain responsible for the Company and complying with ongoing statutory responsibilities.
There will of course be pre-appointment costs associated with advising the Board and overseeing the Circular and convening the General Meeting, annual compliance costs and costs associated with distributing funds to shareholders. However, we seek to minimise these by using the Registrar to process payments and issue the associated paperwork.
Importantly, the costs saved by de-listing VCTs generally significantly exceed the costs of the Liquidation.
Contact us if looking to implement a solvent liquidation of a VCT
We have successfully completed Members Voluntary Liquidations for more than 10 VCTs. Work is currently in progress for the solvent liquidation of Chrysalis VCT PLC, which has assets under management of £15m and just under 2,000 shareholders. It is anticipated that creditors will be paid in full and shareholders will ultimately receive further distributions equivalent to the level of the remaining net assets.
If you have a client that is a VCT which is looking to enter a solvent liquidation, talk to our insolvency practitioners at any of our offices listed below. We have the experience and expertise to deliver efficient and cost-effective results.
And at K and W Recovery, trading as Antony Batty and Company, Thames Valley: