Triple Point Income VCT e shares.

[MisterNick]

Hi,

I saw that Triple Point had posted their Report for the Y/e 31/3/22. On page 100 they state;
E Shares:
During the year the Company paid three interim dividends to E Class Shareholders. £1,012,903 equal to 3.5p per share was paid on 30 July 2021 to E Shareholders on the register on 16 July 2021, £3,472,809 equal to 12p per share was paid on 23 December 2021 to E Shareholders on the register of 10 December 2021 and £1,591,704 equal to 5.5p per share was paid on 14 January 2022 to E Shareholders on the register on 24 December 2021.
During the year the directors identified an accounting issue in respect of the payment of certain interim dividends to shareholders between 30 July 2021 to 14 January 2022 which were made otherwise than in accordance with the CA 2006. While the Company had more than sufficient reserves to pay the dividends, it was discovered during the year that not all of those reserves were “distributable” reserves for the purposes of the CA 2006. Therefore, the proportion of the dividends paid that were not “distributable” reserves at the time they were paid and are technically unlawful distributions for the purposes of the CA 2006. The total amount of unlawful distributions amount to £11,841,932.
The Company has since created sufficient “distributable” reserves to cover the payment of the unlawful distributions by cancelling its share premium account in accordance with the CA 2006 which was approved by Shareholders at a General Meeting on
28 February 2022 and sanctioned by the Court on 28 March 2022. The Company will propose resolutions at a general meeting on
2 September 2022 to rectify the payment of the unlawful distributions as follows: (i) to appropriate the newly created distributable reserves to the payment of the unlawful distributions, (ii) to release the Directors of the Company at the time the unlawful distributions were made from any and all potential liability arising from the unlawful distributions, and (iii) to release the shareholders (and if deceased, their successors in title) who received the unlawful distributions from any and all potential liability arising from the unlawful distributions.

I presume they can resolve the problem in the way they have suggested (given the advice they are quoting) but I wondered whether anybody had an alternative view. Is there any reason to not vote for the resolutions as it seems to get them out of the fix they have created.

Nick

[Mainwaring]

I recall the Board of British Smaller Companies making a similar over distribution some years ago. Shareholders voted to save their asses. It might have been fun to watch it play out in an alternate result but I doubt holders will want to vote for the chaos which would ensue. Im sure HMRC are watching.

[MisterNick]

Thanks, that's what i thought. Entertaining watching from the cheap seats if voted down, but as shareholders we're also in the arena.

[127tolmers]

Yes, an interesting story. Actually British Smaller did it twice and got redemption by shareholders.

I have not studied the Triplepoint in detail but the usual problem is that CA2006 requires accounts to be filed at Companies House before the reserves become distributable. Hence in the above cases the dividends were technically illegal.

CA2006 provides that in certain events the shareholders could be required to pay back the dividend or directors be personally liable. The shareholder liability is non existent for VCT shareholders as they were not party to the declaration of the dividend or knowledgeable as to the circumstances. (This clause is there to catch small personal companies). However in the VCT world the directors are clearly knowledgeable and liable. There may be insurance cover but possibly not for gross negligence.

In my view there should be 2 separate resolutions, one to indemnify the shareholders and one to indemnify the directors. It is just scaremongering to conflate the 2.

The final question is whether the mistake was an honest one by directors and for no personal gain. If so, it appears reasonable to indemnify them. However there have been several FTSE companies who have also made such a mistake and it is often the case that the Finance Director resigned.

All this presupposes that the relevant accounts were properly prepared by the board AND audited and that the illegal dividend was not paid to, say, improve their chances of re-election.

[BusyBumbleBee]

... All this presupposes that the relevant accounts were properly prepared by the board AND audited and that the illegal dividend was not paid to, say, improve their chances of re-election.

And presumably complied with their governance statements included in the annual report page 12:

VCT qualifying status
The Company has maintained its approved VCT status with HM Revenue & Customs. The Company’s
compliance with the VCT qualifying conditions is closely monitored by the Board, who receive regular reports from the Investment Manager and a report annually from our VCT tax compliance advisers Philip Hare & Associates LLP. We will continue to work closely with the Investment Manager to ensure the Company maintains compliance with the scheme rules.

The Tax compliance advisor doesn't seem to be doing the job very well

[MisterNick]

Good morning.

I had a letter from Triple point dated 18th Oct saying they were paying an interim dividend on 4/11 of 12p per share to E Share Class Shareholders.
It was generated by a "significantly higher sale price" of an asset. £2,633,610 compared to £1,206,000 reported in March.

The dividend has been paid this morning at 07.24p per share.

The only thing I can see is that the 7.24p plus the 4.76p they paid on 27/10 adds up to 12p, but this seems an odd way of presenting it.

Any thoughts?

Many thanks

Nick

[MisterNick]

Just found this note, so they did reduce it last week

31 October 2022
Triple Point Income VCT plc

(the "Company")

Change to Interim Dividend
Further to its announcement on 11 October 2022, the Board of Triple Point Income VCT plc has today resolved to reduce the interim dividend from 12.0p per share to E Class Shareholders to 7.24p per share to E Class Shareholders. All dividend dates remain unchanged; therefore, the interim dividend will continue to be paid on 4 November 2022 to E Shareholders on the register at the close of business on 21 October 2022. The ex-dividend date was 20 October 2022.

The reduced dividend follows an administrative error in the calculation of the amount available for distribution which did not account for the interim dividend of 4.76p per share declared on 2 September 2022 and previously paid to E Shareholders on 21 October 2022.


FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:

Triple Point Investment Management LLP
(Investment Manager)
Tel: 020 7201 8989

Jonathan Parr
Belinda Thomas