Death of shareholder democracy

[127tolmers]

So you thought when you bought a share, that every year you would have a chance to hold the directors to account at an AGM for the year gone by and vote on resolutions including the reappointment of directors. Those of you who delved a bit deeper might have thought that Companies Act 2006 gave you protection by requiring a listed company to hold an AGM within 6 months of its year end.

WRONG & WRONG

The scumbags at Edge Performance VCT (EPVCT) with 2 share classes have found a way to bypass all this generally accepted corporate governance stuff.

How is this done? Here is the template.

1) First you get your accounts out so late that the accounts are not in shareholder hands in time for the legal AGM to be properly held.

2) You announce that the adjourned AGM will be held as soon as possible but then take no action.

3) You sell H class investments at a profit to create distributable reserves and use them to buy out the I class shares and wind up the I class before they can vote on the prior year's activities (and, by the way, don't pay H class shares any dividends from the profits).

4) Well done, you have just disenfranchised 73m I class shares (85% of all shareholders) whose net assets halved in the prior year under your stewardship. You will now never have to be accountable to them for your governance.

AHA, but surely shareholders have another remedy under CA2006, by calling for an EGM with the support of 5% of shareholders.

YES & NO

EPVCT announced in an RNS that such a GM had been properly called but before holding the meeting it used the conversion rights under its Articles to remove the I Class from existence and thus frustrate the purpose and voting power of the GM.

These director paragons of corporate governance are Sir Peter Bazalgette (ITV), Sir Aubrey Brocklebank (Downing Four VCT) and Terry Back (Acamar Films EIS).

Where was the regulator, FCA, during these shenanigans? Sadly sitting on the side-lines (despite regular updating) and feeling they had no powers to intervene.

The last chance saloon is now at the over 4 month delayed AGM and at two(!) GMs on 17 January 2022. Hopefully the rump H class will vote to remove the directors and wind the whole omnishambles up.

If you have these shares, please assert your shareholder democratic rights by using them.

[UncleEbenezer]

'ang on. Aren't you an insider there?

Your post reads like something they've contrived as a fait accomplit that has just been announced, and indeed I see an RNS for I share conversion dated yesterday. What happened in advance? Was there neither a shareholder vote nor a whistleblower?

[Lootman]

If you don't like the corporate governance then why don't you do what most people do if there is anything they don't like about the company?

Sell your shares.

I have never bothered to vote in any proxy battle. If I don't like a share, for any reason, I sell it. Simple.

[cprof]

Yes indeed teh death of shareholder democracy. From my perspective, value in I shares was reduced by the directors decisions, the AGM delayed and before I had a chance to vote at the rescheduled meeting my 34,786 I share votes have been converted into 1 H share vote.
Now why did the directors do all that??

I guess hanging onto my one H share will cause some administrative burden

[timbo003]

If you don't like the corporate governance then why don't you do what most people do if there is anything they don't like about the company?

Sell your shares.

That might be a realistic option in the case of non-VCT highly liquid shares, but it is generally not an option for many VCTs shareholders, especially shareholders of small illiquid VCTs such as Edge where management have renaged on their comittment to share buybacks, leaving the share trading at massive discount

Futhermore for all VCTs, shareholders who have bought newly issued shares (i.e. the majority of shareholders) cannot sell for the first five years without taking a big income tax hit

[XFool]

If you don't like the corporate governance then why don't you do what most people do if there is anything they don't like about the company?

Sell your shares.

That might be a realistic option in the case of non-VCT highly liquid shares, but it is generally not an option for many VCTs shareholders, especially shareholders of small illiquid VCTs such as Edge where management have renaged on their comittment to share buybacks, leaving the share trading at massive discount

Futhermore for all VCTs, shareholders who have bought newly issued shares (i.e. the majority of shareholders) cannot sell for the first five years without taking a big income tax hit

Sounds like a good case for avoiding VCTs to me. To date I have never been involved with one, seems that is a worthwhile policy for the future.

[Lootman]

If you don't like the corporate governance then why don't you do what most people do if there is anything they don't like about the company?

Sell your shares.

That might be a realistic option in the case of non-VCT highly liquid shares, but it is generally not an option for many VCTs shareholders, especially shareholders of small illiquid VCTs such as Edge where management have renaged on their comittment to share buybacks, leaving the share trading at massive discount

Futhermore for all VCTs, shareholders who have bought newly issued shares (i.e. the majority of shareholders) cannot sell for the first five years without taking a big income tax hit

Fair enough. I admit I don't know much about VCTs.

More generally I do find that generous tax breaks come with downsides. The sponsors and issuers have you by the short and curlies. I hold quite a few AIM shares in my ISA for their potential IHT relief. But they don't always behave the way I would like. And whilst some have done well, one has gone all the way to zero, the only time that has happened to me.

[Dod101]

If you don't like the corporate governance then why don't you do what most people do if there is anything they don't like about the company?

Sell your shares.

That might be a realistic option in the case of non-VCT highly liquid shares, but it is generally not an option for many VCTs shareholders, especially shareholders of small illiquid VCTs such as Edge where management have renaged on their comittment to share buybacks, leaving the share trading at massive discount

Futhermore for all VCTs, shareholders who have bought newly issued shares (i.e. the majority of shareholders) cannot sell for the first five years without taking a big income tax hit

Fair enough. I admit I don't know much about VCTs.

More generally I do find that generous tax breaks come with downsides. The sponsors and issuers have you by the short and curlies. I hold quite a few AIM shares in my ISA for their potential IHT relief. But they don't always behave the way I would like. And whilst some have done well, one has gone all the way to zero, the only time that has happened to me.

That is of course the point. Buying VCTs comes at a price. If you do not like that, do not buy them or sell when you can. If you did not know what you were buying, well, tough, you should have.

Dod

[UncleEbenezer]

That might be a realistic option in the case of non-VCT highly liquid shares, but it is generally not an option for many VCTs shareholders, especially shareholders of small illiquid VCTs such as Edge where management have renaged on their comittment to share buybacks, leaving the share trading at massive discount

Futhermore for all VCTs, shareholders who have bought newly issued shares (i.e. the majority of shareholders) cannot sell for the first five years without taking a big income tax hit

Fair enough. I admit I don't know much about VCTs.

More generally I do find that generous tax breaks come with downsides. The sponsors and issuers have you by the short and curlies. I hold quite a few AIM shares in my ISA for their potential IHT relief. But they don't always behave the way I would like. And whilst some have done well, one has gone all the way to zero, the only time that has happened to me.

That is of course the point. Buying VCTs comes at a price. If you do not like that, do not buy them or sell when you can. If you did not know what you were buying, well, tough, you should have.

Dod

There are reasonable prices: in the case of VCTs these obviously include the risk of backing fledgeling companies, and the costs of identifying opportunities and working with management towards best outcomes.

Management shenanigans as described in the OP here don't look to me like a reasonable price (and there's considerable history). I'm happy never to have held Edge, though I have quite a substantial VCT portfolio generating rather good returns.

[Arborbridge]

If you don't like the corporate governance then why don't you do what most people do if there is anything they don't like about the company?

Sell your shares.

That might be a realistic option in the case of non-VCT highly liquid shares, but it is generally not an option for many VCTs shareholders, especially shareholders of small illiquid VCTs such as Edge where management have renaged on their comittment to share buybacks, leaving the share trading at massive discount

Futhermore for all VCTs, shareholders who have bought newly issued shares (i.e. the majority of shareholders) cannot sell for the first five years without taking a big income tax hit

As Captain R F Scott said: "We took risks, we knew we took them, and things turned out against us".

What you've described sounds like a real stitch-up, but it always seemed to me that VCT's are likely to be very high risk otherwise why would there be such a tax incentive? Fortunately, you've no doubt spread your investments across many holdings to mitigate the risk, so you won't be in a disaster scenario. I've had the occasional total loss and perhaps a couple of 80%-ers, but that only served to remind me of the risks we take with equity investment.

Arb.

[127tolmers]

https://www.investegate.co.uk/edge-perf ... 00061167W/

Today Edge Performance VCT (EPVCT) published the Circulars, one for for their long delayed reconvened AGM and their GM and one for the Shareholders Action Group requisitioned GM (see below).

https://www.rns-pdf.londonstockexchange ... -12-19.pdf

The Shareholders action Group have a very simple message

We believe that it is now in shareholders’ best interests to wind up the VCT and to get funds returned. By calling this GM
we give you the chance to vote

Unbelievably you have to read to page 18 of the EPVCT written circular for shareholders to find this message and the reasons for it.

A few thoughts on the Boards objections:

your Board intends to pay a further special dividend in the first half of 2022 as well as continuing a regular dividend stream thereafter and activating a Share buyback facility

Promises, promises..... A special dividend could have been paid now and in an even larger amount if the distributable reserves created by the sale of H class assets had not been used for I class dividends so as to wind the class up and prevent them from voting at the AGM. The share buyback has been promised for the last 2 years and even now the discount is not mentioned.

the Investment Manager has a pipeline of new investments which it is about to complete.

Sounds like a poison pill to make it difficult impossible to wind up the VCT and guarantee another 5 years of fees to the manager.

[However, the Investment Manager has signalled that it is not willing to continue to manage the Company without a Board
which is supportive of its plans. Specifically, your Board has therefore reluctantly accepted that the Investment
Manager will resign if the Board’s recommendations are not supported by Shareholders. To protect Shareholders
from the impact of having to continue to pay the Investment Manager for a period of nearly 14 months, the Investment
Manager has agreed with the Board that the if Investment Manager resigns before 31 January 2022, its resignation will
take effect as at 28 February 2022, the Company’s current financial year end; the Company may similarly terminate the
Investment Manager’s appointment effective as at 28 February 2022 if the Board’s recommendations are not supported
by Shareholders./i]

Well at last some "good news". If the Shareholder Action Group is successful, the manager will not get £400k of termination fees or his excessive 19% performance fee.

[i]If the Requisitioned Resolutions are passed, it will signal the closure of the Company, the loss of its venture capital trust
status and the resignation of its high-performing Investment Manager, bringing to an end the highly successful trajectory
of the H Share fund, with no expectation of future growth in the value of your investment in the Company and with no
clarity as to future dividends or share buyback opportunities.

This is the "high performing" manager who lost over half the I class shareholders money! There is no loss of VCT status when a VCT is put into liquidation; funds are returned to shareholders tax free with due consideration on timing for the very few shareholders who bought in the last 5 years.

The Requisitioning Shareholders are trying to use their historic shareholding to seize control of your Company
and the Board believes it is their intention to seek payment of money to which they are not entitled. To help
us prevent the Requisitioning Shareholders from doing so, it is important that you vote.

Total board paranoia. But they are right about one thing it is important that shareholders vote.

]Proposal: Press the Investment Manager for a rebate of fees
The Board considers it extremely inappropriate to take action against the Investment Manager that has delivered for
Shareholders the best performing venture capital trust in the UK over the past five years (according to the AIC) with
a NAVTR of 215p per share.[/i

The proposal relates to the charging of excessive fees to the I class in the years after its planned wind-up date.

[i]A discontinuation of the Company would result in the H Share class losing significant value from its existing
investments, should it be possible to exit them at all at anything other than “fire sale” prices, and would mean that
Shareholders miss out on future investment returns. This action would undoubtedly significantly damage Shareholder
value.

As half the portfolio is currently cash and most of the rest highly liquid AIM stocks this is incorrect. Only a very small portion of the portfolio is unquoted and a liquidator would have 3 years to conduct an orderly sale.

Buried in the small print is the ability to scan your proxy votes. This avoids the vagaries of the post and leaves an electronic proof of voting.

Members may also choose to send a legible scan of the completed and signed form of proxy to proxies@city.uk.com.

Finally for a good laugh, here is the undated (but released today) grumpy Chairman's letter.

https://edge.vc/wp-content/uploads/2021 ... letter.pdf

4 months late, the accounts are finally circulated to H class shareholders. Of course nothing was sent to the I class shareholders (73.0m shares or 86% of the company) who were disenfranchised last week. Why would they want to receive accounts showing that their net asset halved in the last year and that the board was unwilling to be accountable to then an AGM?

In addition, your Board is putting to shareholders a resolution (Resolution 6 in the enclosed notice of the
general meeting) to cancel the Company’s capital redemption reserve and share premium account. As of
the date of this letter, the Company has no distributable reserves and is therefore unable to make dividend
payments or to offer shareholders the facility to sell their shares back to the Company. Approval of the
resolution would result in the Company having some £14.74 million of distributable reserves available.

This all sounds good. However the accounts to 17 November 2021 filed at Companies House on page 7 states that the distributable reserves of the company are £6.452m. About £2.5m was used for the I class dividend so there should be nearly £4m left. Who is telling porkies? There was enough by their reckoning to have paid a 34p H class dividend now.

[127tolmers]

https://www.investegate.co.uk/edge-perf ... 47586473V/

On Tuesday 21 December 2021 at 11.00am, the Company's investment manager, Edge Investments Limited, is hosting a Webinar in which it will:

Ø update the Company's shareholders on the Company's investment portfolio;

Ø comment on the resolutions proposed by the shareholders who have requisitioned a general meeting; and

Ø present the plans approved by the Company's board of directors for:

· the payment of more, large tax-free dividends;

· the implementation of a share buy-back scheme to provide liquidity and support the share price; and

· the Company's future

Invitations to participate in the Webinar are being sent out imminently.

For those of you not selected for an invitation, the link for the Webinar is: Edge Performance VCT Webinar | Shareholder Value Is Under Attack