Floating non-voters may be key for SMEs

Smaller company entrepreneurs should be encouraged to issue non-voting shares on the stock market if they are faced with a choice between losing management control or foregoing funds for expansion, according to a CBI/ Grant Thornton report published this week.

Jamie Borwick, chief executive of London taxi manufacturer Manganese Bronze and chairman of the working party that prepared the report, said that discussions would have to take place with institutional investor groups since issuing non-voting shares was against the current trend of enfranchising shareholders. ‘But it’s like homosexuality,’ he told Accountancy Age. ‘Everybody agrees it’s an acceptable alternative, but nobody is arguing to make it compulsory.’

The report says that there are unnecessary regulatory and tax hurdles that make flotations difficult and expensive. This could be partly addressed by creating a new, separate market sector for the 1,700-odd quoted companies not in the FTSE-350, stimulating investor interest and giving a new regulatory framework for such businesses.

While smaller quoteds are often similar to many AIM companies, only the latter benefit from tax breaks such as Venture Capital Trusts because they are technically ‘unquoted’. The report calls for a broad review of the ‘tax playing field’ to encourage private investment in small quoted companies.