Unlike other investment companies, Annabel Brodie-Smith, communications director of the Association of Investment Companies, says most split capital investment companies have a limited life (about 10 years) and issue more than one class of share.
At least one class of share in a split is likely to have a limited life, which Ms Brodie-Smith says means that at a set date the company will need to sell off some or all of its assets and distribute the money to those shareholders.
If the whole company has a limited life, Ms Brodie-Smith says this triggers a wind up procedure – the end of the company.
At wind up, the company:
• sells off its assets;
• pays off any debts, such as bank loans; and
• distributes what is left over to the shareholders according to the rules of the different types of share.
If you are not looking to get your money straight away, Ms Brodie-Smith says the investment company will often give you the opportunity to continue your investment in a new investment company or some other funds.
This is known as a ‘rollover’ and Ms Brodie-Smith says it will normally be done in a tax-efficient way.
If you take the cash option, Ms Brodie-Smith says capital gains tax may be payable.
She says: “You don’t have to hold on to your shares until the wind up date. You can sell them at any time, as you would with other types of share.”
