Rules around investing in growth companies need to be changed, urges a report commissioned by the London Stock Exchange.
Venture capital trusts (VCTs) should be allowed to buy and sell shares in the secondary market, rather than being restricted to new share issues, recommends the report from professional services firm Grant Thornton.
It also proposes that VCTs should be allowed to invest in companies with gross assets of up to £15 million and up to 250 employees, extending the current limits of £7 million and 50 staff.
‘Restrictions which mean relatively few AIM companies are eligible for investments by VCTs are obviously counterproductive,’ argues Stephen Gifford, chief economist at Grant Thornton.
He adds, ‘VCTs are a vital catalyst for AIM, often acting as an anchor investor that encourages other institutional funds to invest in the same company.’
Chris Allner, chairman of the investment committee at Octopus Ventures, agrees that the VCT rules need an overhaul.
He says, ‘We must make it easier for VCT investors to follow on in their successful investments, instead of finding that the rules, such as the 50 employee limit, prevent this.’
Other recommendations in Grant Thornton’s report include making capital gains tax more favourable to investors in growing companies, and considering making AIM shares eligible for inclusion in ISAs.