Interactive Investor forced sale at a loss

RaistlinTheMagus

I was recently informed by Interactive Investor, the provider of my ISA, that my shares in Dunedin Enterprise Investment Trust would be forcibly removed from my ISA if I did not sell them soon – at a significant loss. This is because the directors of Dunedin Enterprise are intent on winding up the company and returning its capital to shareholders as cash in a sequence of payments as they liquidate its remaining assets. The first step in this process is a de-listing of the company’s shares, which – in the normal run of things – makes them ineligible ISA investments. However, the Directors of Dunedin Enterprise have issued the following statement:

"The Directors are conscious that a significant proportion of the Shares are held by investors through ISAs (and Junior ISAs and Lifetime ISAs). Assuming (i) that within one year of the Company being placed into members' voluntary liquidation, HMRC will be notified that the Company is being wound up; and (ii) that the Company will not make new investments during the liquidation period, the Company should continue to be treated as an approved investment trust under the provisions of Section 1158 and 1159 of the Corporation Tax Act 2010 until the end of the liquidation period. The Company intends to conduct its affairs so as to meet the ongoing provisions required of a company operating as an approved investment trust. As such, the Shares would continue to be stocks and shares 'qualifying investments' during the liquidation period for ISA purposes. ISA providers may therefore permit the Shares to continue to be held within ISA accounts during the liquidation period with the proceeds of distributions continuing to be credited to each ISA Shareholder's ISA account."

If I sell my shares now, as Interactive Investor seems intent on forcing me to do, I will make a significant loss. If I do not sell my shares very soon and allow them to be ejected from my ISA into a non tax-exempt investment account – as Interactive Investor is intent on doing – then I will be liable for a large tax bill as my shares are systematically turned into cash – and, once more I will suffer a significant loss. This prospect is being forced on me by the entirely unnecessary action of Interactive Investor, which unjustified and arbitrary act is contrary to my interest.

I have been told by Hargreaves Lansdown that they are allowing shareholders to keep their ISA investments during the liquidation process, just as the Directors of Dunedin Enterprise indicate is allowed. Hence, the decision of Interactive Investor is arbitrary and malign.

Voyager2002

So put these points to II in a secure message or letter... provide estimates of the losses you anticipate and ask them to confirm that they will be liable for the amount in question.

Is there any reason why you believe that the current market price is lower than the cash you reasonably expect will be returned to you as the IT is wound down?

I also wondered... if selling now means that you crystallise a loss, why would you be paying tax if you sell once the security has been ejected from your ISA?

wmb194

RaistlinTheMagus said:

I was recently informed by Interactive Investor, the provider of my ISA, that my shares in Dunedin Enterprise Investment Trust would be forcibly removed from my ISA if I did not sell them soon – at a significant loss. This is because the directors of Dunedin Enterprise are intent on winding up the company and returning its capital to shareholders as cash in a sequence of payments as they liquidate its remaining assets. The first step in this process is a de-listing of the company’s shares, which – in the normal run of things – makes them ineligible ISA investments. However, the Directors of Dunedin Enterprise have issued the following statement:

"The Directors are conscious that a significant proportion of the Shares are held by investors through ISAs (and Junior ISAs and Lifetime ISAs). Assuming (i) that within one year of the Company being placed into members' voluntary liquidation, HMRC will be notified that the Company is being wound up; and (ii) that the Company will not make new investments during the liquidation period, the Company should continue to be treated as an approved investment trust under the provisions of Section 1158 and 1159 of the Corporation Tax Act 2010 until the end of the liquidation period. The Company intends to conduct its affairs so as to meet the ongoing provisions required of a company operating as an approved investment trust. As such, the Shares would continue to be stocks and shares 'qualifying investments' during the liquidation period for ISA purposes. ISA providers may therefore permit the Shares to continue to be held within ISA accounts during the liquidation period with the proceeds of distributions continuing to be credited to each ISA Shareholder's ISA account."

If I sell my shares now, as Interactive Investor seems intent on forcing me to do, I will make a significant loss. If I do not sell my shares very soon and allow them to be ejected from my ISA into a non tax-exempt investment account – as Interactive Investor is intent on doing – then I will be liable for a large tax bill as my shares are systematically turned into cash – and, once more I will suffer a significant loss. This prospect is being forced on me by the entirely unnecessary action of Interactive Investor, which unjustified and arbitrary act is contrary to my interest.

I have been told by Hargreaves Lansdown that they are allowing shareholders to keep their ISA investments during the liquidation process, just as the Directors of Dunedin Enterprise indicate is allowed. Hence, the decision of Interactive Investor is arbitrary and malign.

How much time do you have? You could transfer the holding to HL.

Edit: Ah, it might be too tight.

masonic

This is a fund that invested primarily in private equity, so it would not be at all surprising if the realisations were at a considerable discount to NAV. The discount of the trust has widened since the wind-down announcement. I'd be surprised if assets were sold off for better than 70% of their current valuation on average, so the current discount of 27% seems fair. So I do not think that you should expect a massive gain if you hang on to your shares. Perhaps you will benefit from being able to claim a capital loss, should they be ejected from your ISA.

wmb194 said:

How much time do you have? You could transfer the holding to HL.

Edit: Ah, it might be too tight.

The alternative, if the OP has a HL ISA as well, or hasn't used this year's ISA allowance, is to sell on the ii side and buy on the HL side. Though that does require a float of cash, or other investments that could be sold and bought in the other direction.