Venture Capital Trusts and Members' Voluntary Liquidations (“MVLs”)
This is an area of specialism for Antony Batty and Co. It requires highly technical advice which results in a reduction in costs and risk. The solvent winding up of Venture Capital Trusts (VCTs) using Members’ Voluntary Liquidations is a particular specialism of ours. We have a great deal of experience and expertise in this specialist area, using a method of working which reduces the Liquidation risk and also the cost of the Liquidation process. Our highly experienced team deal with the complexities that MVLs of VCTs often present.
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What is a Venture Capital Trust?
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. VCTs were introduced in 1995, since when over £8 billion has been invested by them.
What is the MVL Process for Venture Capital Trusts
Like any solvent Company that comes to the end of its useful like, VCTs (a special feature of which is that they have minimal assets or long-term illiquid assets) can be wound up cost-efficiently and effectively using the MVL procedure. However, experience shows that the ongoing management fees and market listing fees of such VCTs can be uneconomic. This has led us to develop a method of working that overcomes these issues.
How we work to reduce the risk and cost associated with MVLs of VCTs.
Responsibility for ongoing investment management and trading decisions is the key issue with the MVL process for VCTs. Once appointed, a Liquidator becomes responsible for that Company, with the board of directors’ powers ceasing.
Liquidators must be extremely cautious and generally seek independent advice regarding asset realisations. In the context of a VCT, however, such confidential advice can be expensive. In addition, it can also increase the risk of shareholder challenges. This is because shareholders have specifically chosen an investment manager when investing in a VCT.
In order to overcome these issues, we have developed a method of working which reduces the Liquidation risks as well as reducing the costs of the Liquidation process, whilst leaving responsibility for investment management decisions with the existing investment manager.
This is done by replacing the board with a Supervisory Committee (usually comprising existing board members) whose job is to make recommendations to the Liquidator based on advice received from the Investment Manager.
Further resolutions are also sought that:
- The Supervisory Committee and the Investment Manager authorise the Liquidator to act on their recommendations.
- The Liquidator will not have any liability for acting on the recommendations of the Supervisory Committee or Investment Manager and will not be required to obtain independent advice in relation to the winding up the portfolio.
We also seek a resolution enabling the distribution of asserts in specie. This enables any remaining investments to be distributed without them being sold.
How are the costs reduced significantly?
The above resolutions limit the Liquidation liability and enable the existing VCT decision structure to remain in place, which significantly reduces the time involvement of the Liquidator in the investment realisation process and, therefore, costs.
The Liquidator does however remain responsible for the Company and for complying with ongoing statutory responsibilities.
There will of course be pre-appointment costs associated with advising the board and overseeing the circular, convening a general meeting of shareholders, 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 significantly exceed the costs of the Liquidation itself.
