The Oxford Technology venture capital trusts (VCTs), two of which are awaiting a decision by HM Revenue & Customs (HMRC) on whether they will continue to have VCT status, have invited their shareholders to nominate themselves or someone they think would be suitable to stand as non-executive director (NED). Oxford Technology VCT (OXT) and Oxford Technology 3 VCT (OTT) had their VCT status stripped in March because when investing in pharmaceutical company Scancell (SCLP), their manager breached the rules on investment limits, though this status has been temporarily restored.
The VCTs' boards are setting up an independent panel to put forward a shortlist of candidates to become non-executive directors and chairmen, and putting together a new governance structure for the VCTs. This panel is understood to include at least two shareholders, and should be completed by the end of this week and able to start its selection from next week.
Shareholders will be asked to vote at the annual general meeting (AGM) on the proposals for the new governance structure and the non-executive directors, if suitable candidates can be found by that date.
OXTAG, a campaign managed by ShareSoc, the UK Individual Shareholders Society, is recommending that shareholders vote against the re-election of the VCTs' fund manager, Lucius Cary, as director of Oxford Technology VCT and Oxford Technology VCT 3, though supports him remaining as manager. And it is recommending voting against the re-appointment of the auditors, James Cowper LLP.
"These recommendations are based on the fact that the boards, the manager and the auditor of these companies have failed you," says OXTAG. "You should use your vote to ensure change."
It is also recommending that shareholders vote against the accounts as it does not believe they represent a fair view of the current financial position of the companies. Though this has no material effect, it represents shareholder dissatisfaction. OXTAG also recommends voting against the directors' remuneration because it does not take into account the cost of the addition of independent directors.
OXTAG is an action group set up following the funds' loss of VCT status in March. Its primary aim is to try and maintain the funds' status as VCTs and keep shareholders informed. If the VCTs lose their status, OXTAG will develop policies on what should happen to them.
OXTAG hopes that each VCT will have two independent directors - one chairman and one non-executive director - and no manager representative as at present. It feels that it would be better for corporate governance not to have the fund manager on the board.
However, OXTAG says some current board representatives favour two independent directors - one chairman and one non-executive director - and one manager representative. This could continue to be fund manager Lucius Cary if he is re-elected onto the boards of Oxford Technology and Oxford Technology 3.
Currently, each of the four Oxford Technology VCTs only has a board of two, one of which is fund manager Lucius Cary.
All four Oxford Technology VCTs were due to hold their AGMs on 9 July, but these have now been put forward to 27 August, partly because the funds' boards are waiting to see what decision HMRC takes on the VCT status, but also to get the governance proposals and board candidates together.
HMRC set aside its decision to revoke Oxford Technology and Oxford Technology 3's status on 6 June, so they are being treated as if it has not been withdrawn. This means shareholders need not take any steps in relation to this matter for the time being, according to the VCTs' boards.
HMRC is now considering afresh whether it will be appropriate to withdraw VCT status from these funds. It it does this, shareholders will face the loss of substantial tax benefits, including:
• Front end income tax relief in shares issued within a period of five years prior to this notice will be withdrawn;
• Any deferred gains come to charge;
• Subsequent dividends from the VCTs will not be exempt from income tax; and
• Any subsequent gains on disposal of the VCTs' shares will not be exempt from capital gains tax.
