VCT and EIS rules to change
Article Date: Apr 29 2009Venture capital trusts (VCTs) and the Enterprise Investment Scheme (EIS) are to be opened to companies with most of their operations outside the UK from next year.
The European Commission has requested the rule change in order for the schemes to comply with state aid legislation.
Currently, only companies with at least 50 per cent of their qualifying activities in the UK can accept investment from VCTs or under the EIS. The rules are to be relaxed so that all companies are eligible as long as they have a 'permanent base' in the UK. In a related move, VCTs will no longer be limited to quoting their shares in London, but will be able to list on other European stock exchanges instead.
A change has also been requested to the minimum equity requirement for VCTs. Currently they must invest 21 per cent of their total funds in ordinary shares. The new rules will require 49 per cent of a VCT's cash to be invested in 'equity', but the term will be more loosely defined.
Finally, enterprises in serious financial difficulty may be excluded from using the schemes.
Details of all these changes have still to be drawn up, but they are expected to pass into UK law as soon as next year.
