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Core VCTs – A Vote Is Called: If You, Or Someone You Know, Held These Then Please Read

By Nigel Somerville | Sunday 5 December 2021


Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.


I have not written about the Core VCTs for several years. Given that the three companies – Core VCT (CR3), Core IV VCT (CR4) and Core V VCT (CR5) were formally delisted and wound up way back in 2015/2016 some may be surprised to learn that a shareholder vote has been ordered by the Court of Appeal and that vote is due to take place at an EGM on or around December 17th, with electronic and postal votes to be received by December 16th. In my view it is absolutely vital that every possible vote is cast.


Alot has been going on behind the scenes and I would urge all shareholders to cast their votes as a matter of urgency – especially given that this is to occur in the middle of the Christmas postal rush, which will inevitably delay things.


What is at issue?


In 2018 the three companies were restored to the register at Companies House and a new Liquidator appointed to conduct an investigation into the affairs of the companies and their winding up. The Court ruled that there were serious issues to be investigated in respect of the management of the companies, and the conduct of their liquidations. However, the Appeal Court ordered that a shareholder vote be conducted as to whether the investigation is completed or whether to wind the companies up once again with no investigation. The new liquidators were ordered to take a neutral position in the meantime – even so, according to the new liquidator’s statement of receipts and payments at Companies House, dated 19 July 2021, paragraph 4.6 states:


applications have been made under section 212 of the Insolvency Act 1986 seeking a) leave of the Court to bring a claim against the Former Liquidators,  and b) to bring a claim against the Former Liquidators


Now shareholders in the three former venture capital trusts have been asked to vote on the matter.


Self-Declaration


I have been asked – and accepted – to serve on the steering committee of a Core VCT Shareholder Action Group. Having spent some time looking in to certain matters myself I agree with the Court’s conclusion that there are serious issues, and am therefore very keen that a new liquidator is given the opportunity to establish whether those serious issues are of merit or not.  


Why You Should Vote


The Manager and associates have – perhaps understandably, given the amount of hassle involved – been very keen to have the plug pulled on all of this. However, given that the Court has already deemed there to be serious issues to be investigated, denying the investigation would, it seems to me, be totally unsatisfactory as it would leave matters untested. Now that is a matter for shareholders and the Court to decide.


My understanding is that shareholders are being presented with a risk-free option to have the affairs of the companies reviewed and if something is found to be amiss of sufficient magnitude, shareholders could (and I stress could) find themselves in line for further returns. Indeed my understanding is that the potential claim could outstrip to total returns per share of the VCTs – if the investigations prove up sufficient problems and the court sees fit. Obviously that may or may not happen and I am not a lawyer or accountant, which is why I want matters looked into by those who are qualified to reach a conclusion one way or the other.


If investigations show that all was well then someone will have a big legal bill to pay. My understanding is that the shareholders are not in line for that risk: thus far, the case has been funded from private means under which the funders would get back a multiple of their cash that they put at risk if the case is successful. Obviously the funders would hope to make a profit – but that would mean seeing a case through to success in the courts and therefore the funders being right – at which point one would hope there is enough cash to offer further rewards to shareholders. If that does not happen, then the funders lose the cash they have put up but my understanding is that shareholders will not face a bill – that would be the funders’ headache. As such, it seems to me that shareholders have a risk-free option to get a new liquidator to cast his/her eye over the affairs of the Core VCTs and their liquidations.


I therefore wholeheartedly recommend that shareholders vote in favour of the resolutions to retain the current liquidator and allow the investigations to be completed.


Once I have the voting form and details I will have them published on ShareProphets so that shareholders know what to do if they wish to support the new liquidators to see the job through. In the meantime I suggest that old share certificates and paperwork are dug out so that votes may be cast quickly when the paperwork arrives.


Watch this space!

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