There was an interesting article in the FTMoney edition yesterday (6/6/2015) on the proposed wind up of Rensburg AIM VCT Plc. The board of directors are pushing ahead with this proposal and a General Meeting to approve it is scheduled with the AGM on the 22nd July.
The FT article by Adam Palin points out that anyone who claimed capital gains roll-over relief on their original investment in the VCT may not wish to support the wind-up. It quotes me (as a shareholder in that position) as saying “The cash I would receive would barely be enough to cover my tax bill” and “My shares are worth practically nothing if they wind it up“. Indeed the position is potentially actually worse than those off the cuff remarks indicated because, as I have pointed out to Mr Battersby the Chairman of the company, even with capital gains tax at a lower rate than applied when I bought the shares, the tax bill would still be higher that the current net asset value of the shares. So unless you can use up the tax claim within your annual allowance, or soak it up in some other tax advantaged investment, then it makes no sense to vote for a wind-up.
Avoiding the tax is problematic as is the cost of the wind-up and realisation of the assets of the trust at near their market value. Bill Nixon of Maven who has previously written to shareholders is also quoted in the article. He said “There’s no precedent for old money VCTs to wind up and cystallise capital gains …… It’s inexplicable“. Mr Nixon said he has offered to manage the VCT for free for two years but Barry Anysz, one of the directors of Rensburg VCT is reported as saying that Maven have not engaged “formally” with the Rensburg board. What does that mean? However it seems likely that no serious engagement has taken place between the board and Maven or any other VCT or VCT manager to consider alternatives to a wind-up.
It’s worth considering how the board got into this invidious position where the company is in a strategic hole. It has become too small in size with few options now available. Back in June 2012 ShareSoc issued a note recommending votes against all the directors partly on the grounds that the policy of consistently returning cash to shareholders via dividends while making few new investments would lead to difficulties. Cash dividends were not covered by profits earned so effectively assets were being returned to shareholders. Indeed the note said “In the long term, if this policy is continued it will surely prejudice the viability of the company unless more funds are raised” and so it has turned out to be.
So in essence the company and its shareholders are now facing some difficult decisions due to past policies adopted by the directors. Are they being any wiser about what is now being proposed? Investors in the company will have to judge that for themselves. But make sure you look at your tax position closely and take expert advice on it if required.
In the meantime, ShareSoc has requested a copy of the share register for the company and may be writing to shareholders before the AGM and Wind-up Meeting. Anyone who is not on the register may record their interest on our web site here: http://www.sharesoc.org/campaigns.html (use the form on the right hand side of the page), which also gives a lot more background information on past events at this company.