Why Companies Don’t Get Struck Off, and Maven VCT5

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I have had two listed companies in my last 25 years of investing, that delisted and then became worthless. But the directors refused to put them into liquidation or ask for them to be struck off the register of companies at Companies House (which can be done if the company has ceased trading and no debts remain). In both cases the directors claimed they were going to revive the company with a new business but neither seemed very realistic to me and I thought this was a case where the directors did not want to be seen as being former directors of liquidated companies. Requests to Companies House to have them struck off were appealed against, although one of them finally did get removed. But having attended the Maven Income and Growth VCT 5 AGM (MIG5), I now know there may be another reason.

In response to a question, Bill Nixon of Maven explained why they don’t want investee companies to be struck off the Companies House register (they have quite a few “zombies”, the walking dead, still included in the portfolio list in the Annual Report). This is because the cost of the investment in them continues to be part of the “qualifying investments” pool under the VCT rules. Yes it’s all a bit daft is it not but this kind of thing always arises when rules are complex, as they certainly are in VCTs.

Two for the price of one, and my worst investment.

There is a full report on the MIG5 AGM here. The extra stuff in mine shows how disastrous was my investment in this company some 17 years ago, offset to a large extent by the generous tax breaks. There are some lessons drawn from that debacle. I believe Tim might have been a lot wiser and bought the shares in the “second-hand” market years later which is a tactic to be followed in the VCT market when opportunities arise, although they are not as common as they used to be. It’s worth saying here that the performance problems at this VCT mainly arose in its early days and before the change of name and new management by Maven.

Roger Lawson

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