British Smaller Companies VCT has called a General Meeting to approve resolutions to rectify past accounting errors that resulted in technically illegal payments of dividends and share buy-backs back in 2006-2008. In essence the company did not have the reserves required. So these “whitewash” resolutions as they are called ask shareholders to waive any claims against the directors for these errors, and claims against shareholders who received the dividends when they should not have. This follows similar whitewash resolutions that were passed at a previous General Meeting in July this year for later mistakes of the same kind.
Now shareholders might be happy to support these resolutions, but there is one thing they should consider. I can see no mention in the recently circulated documents of the position of the fund manager (YFM) who actually gets a performance fee partly based on dividends distributed. So in fact the performance fees paid out might have been incorrectly calculated.
In essence it appears to me that YFM have been paid a performance fee based on an illegal payment of dividends. Not only that, but YFM actually look after administration and accounting in this company so they are responsible for the error in the first place. It would seem to me that they should be refunding any performance fee that was incorrectly paid out, but there is no mention of this in the recent documents.
I have written to the company chairman, Mrs Helen Sinclair, asking for some explanation and why no adjustment to the performance fees has been mentioned.
The General Meeting is on the 13 January 2014 in London and shareholders might care to attend to hear further explanation. In the meantime they may wish to delay voting by proxy on the resolutions before Mrs Sinclair provides some answers.