Venture capital trusts

Part

LR Listing Rules

Chapter

Venture capital trusts

Printed on: 10/05/2025

Rulebook at: 01/01/2006

LR 16

Venture capital trusts

LR 16.1

Application

01/07/2005

LR 16.1.1

This chapter applies to a venture capital trust with, or applying for, a primary listing.

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LR 16.2

Requirements for listing

01/07/2005

LR 16.2.1

To be admitted to listing, a venture capital trust must comply with LR 2 (Requirements for listing - all securities) and LR 6 (Additional requirements for listing equity securities), subject to the modifications and additional conditions set out in LR 16.2.2 R to LR 16.2.10 R.

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HM Revenue and Customs status

LR 16.2.2

A venture capital trust must have obtained either:

(1) confirmation from HM Revenue and Customs that it qualifies as a venture capital trust, if it has been in existence for more than three years; or
(2) provisional approval from HM Revenue and Customs, if it has been in existence for less than three years.

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Directors and investment managers

LR 16.2.3

A venture capital trust must satisfy the FSA that its directors and any investment managers have sufficient and satisfactory experience (usually over at least the preceding three years) in the management of a portfolio of investments of the size and type in which the venture capital trust proposes to invest.

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LR 16.2.4

The board of directors of a venture capital trust must be able to demonstrate that it will act independently of any investment managers of the venture capital trust.

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LR 16.2.5

A majority of the board must not be directors or employees, or former directors or employees of, or professional advisers to, the investment managers or any other company in the same group as the investment managers.

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Accounts, business activities and working capital

LR 16.2.6

LR 6.1.3R (1)(a) (audited accounts for three years), LR 6.1.4 R (nature and duration of business activities) and LR 6.1.16 R (working capital) do not apply to a venture capital trust.

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LR 16.2.7

LR 6.1.3R (1)(b) to (f) apply to a venture capital trust to the extent that it has published accounts.

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Investment restrictions

LR 16.2.8

A venture capital trust must not control the companies in which it invests in such a way as to render them subsidiary undertakings until it has obtained approval as a venture capital trust from HM Revenue and Customs.

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LR 16.2.9

None of a venture capital trust's investments, other than in a venture capital trust or a company which would qualify as a venture capital trust if it were listed, must represent more than 15% by value of its investments.

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LR 16.2.10

No more than 20% of a venture capital trust's total assets may be invested in the securities of companies which are property companies.

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LR 16.3

Continuing obligations

01/07/2005

LR 16.3.1

A venture capital trust must comply with LR 9 (Continuing obligations) subject to the modifications and additional conditions set out in LR 16.3.2 G to LR 16.3.7 G and LR.

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Investment restrictions

LR 16.3.2

A venture capital trust must comply with LR 16.2.8 R to LR 16.2.10 R at all times.

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Total value of funds raised

LR 16.3.3

The total value of funds to be raised in any twelve month period by a listed venture capital trust must not exceed the total amount of venture capital funds managed by that trust's investment manager or directors where relevant, for at least the preceding three years.

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Annual report and accounts

LR 16.3.4

In addition to the requirements of LR 9.8, a venture capital trust must include in its annual report and accounts:

(1) a list of all investments with a value of greater than 5% of the total assets of the venture capital trust and at least the 10 largest investments stating, with respect to each investment so listed:

(a) a brief description of the business;
(b) the proportion of capital owned or intended to be owned;
(c) the voting rights attributable to the shares owned;
(d) the cost of the investment;
(e) the value of the investment at the latest practicable date;
(f) the method of valuation; and
(g) brief details of the results and assets and liabilities taken from the most recent audited accounts, including at least profit before tax, profit or loss for the period, total assets and total equity and liabilities;

(2) details of:

(a) the total of provisions made against unlisted investments;
(b) the amounts written off such investments in each of the latest three financial years; and
(c) any individual provision or write off which exceeded 5% of the total assets of the venture capital trust;

(3) a full description of the methods of valuation used including a justification of any method of valuation which does not conform with the Guidelines for the Valuation and Disclosure of Venture Capital Portfolios issued by the British Venture Capital Association; and
(4) details of any investments made in any company in which other funds managed by the same investment manager have also invested.

01/07/2005

Compliance with the Combined Code

LR 16.3.5

In the case of a venture capital trust with no executive directors, in respect of the Combined Code:

(1) LR 9.8.8 R does not apply in respect of the Combined Code; and
(2) LR 9.8.6 R does not apply in respect of principles B.1 to B.2 and provisions B.1.1 to B.1.6 and B.2.1 to B.2.4 of the Combined Code except to the extent that they relate specifically to non-executive directors.

01/07/2005

Loss of tax status

LR 16.3.6

A venture capital trust must notify the FSA as soon as possible if it loses its tax status under section 842AA of the Income and Corporations Taxes Act 1988.

01/07/2005

LR 16.3.7

In the situation set out in LR 16.3.6 R the listing of a venture capital trust's shares will normally be suspended until it publishes proposals either to continue trading as an investment company or to be wound up.

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LR 16.4

Transactions

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Significant transactions

LR 16.4.1

LR 10 (significant transactions) applies to venture capital trusts except for transactions which fall within the stated investment policies of the venture capital trust.

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Related party transactions

LR 16.4.2

LR 11 (Related party transactions) applies to venture capital trusts with the following modifications.

01/07/2005

LR 16.4.3

In addition to the definition in LR 11.1.4 R a related party includes any investment manager of the venture capital trust.

01/07/2005

LR 16.4.4

In addition to the definition in LR 11.1.5 R a related party transaction includes:

(1) any arrangement by which a venture capital trust takes an interest in a company in which its investment manager has invested or intends to invest on its own account, unless the investment is made either at the same time and on the same terms or in accordance with a pre-existing agreement between the venture capital trust and the investment manager; and
(2) a venture capital trust that enters into a transaction with another fund managed by the same investment manager.

01/07/2005

LR 16.4.5

Where a venture capital trust intends to invest in a company in which another fund managed by the same investment manager has invested or intends to invest, the investment must be approved by the directors of the venture capital trust who are independent of the investment manager unless the investment is made either at the same time and on the same terms or in accordance with a pre-existing agreement between the venture capital trust and the investment manager.

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Venture capital trusts which are also investment trusts

LR 16.4.6

A venture capital trust which is also an investment trust and which either has or is seeking a listing, must comply with the requirements set out in this chapter and with the following provisions:

(1) the following requirements for listing:

(a) LR 15.2.2 R (2), (3) and (4);
(b) LR 15.2.11 R (1); and
(c) the requirements laid down for investment trusts in section 842 of the Income and Corporation Taxes Act 1988; and

(2) the continuing obligations set out in:

(a) LR 15.4.14 R;
(b) LR 15.4.12 R (3); and
(c) LR 15.4.21 R (1), (2), (4) and (5).

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