For funds raised on or after April 6, 2010, the Government proposes that VCTs have at least 70 per cent of their qualifying holdings in “eligible Shares”.
There will be a definition of “eligible shares” which is wider than the current definition and will include certain types of preference shares.
Currently, a single VCT investment can have maximum of 90 per cent loan stock and 10 per cent equity. The whole VCT portfolio as a maximum of 70 per cent loan/30 per cent equity.
Matrix Private Equity Partners chief executive Mark Wignall says: “Precisely what this all means remains unclear. Fundamentally, they are suggesting 70/30 as opposed to 30/70. What we do not yet understand is what constitutes equity. Until we have got our heads around that it is
too early to give a judgment.
“We are looking to contribute to the fine print. We would not welcome any definitive legislation that would make new VCT investment more risky. A number of us use loans as well as equity to reduce the risk when we make investment and anything that would make it more risky would not be a good thing.”