Investors trapped in the failed Woodford Equity Income fund can now vote on a £230m compensation scheme.
Link Fund Solutions Limited (LFSL) has announced that voting is open on its proposed ‘scheme of arrangement’ for investors in LF Equity Income Fund (formerly Woodford Equity Income Fund).
This follows Mrs Justice Bacon issuing an order on 13 October 2023 requiring LFSL to convene a single meeting of creditors affected by the scheme for the purpose of considering and, if thought fit, approving the scheme.
A scheme of arrangement is a court-approved arrangement between a company, its shareholders, and its creditors. The meeting will take place on 13 December online and those affected have until 4 December to register to vote. Scheme creditors may choose to vote on the scheme in advance, or to attend the scheme meeting (in person or by proxy) to vote.
LFSL will announce the result of the scheme meeting by no later than 5pm on 15 December 2023.
The scheme requires the support of 75% by value, and a majority in number, of those scheme creditors who vote on the scheme.
LFSL said it considers the scheme to be in the best interests of scheme creditors, “offering the certainty of payment from a settlement fund of up to £230m”.
The settlement fund to be paid to scheme creditors under the scheme comprises all of LFSL’s assets, plus a voluntary contribution of £60m from LFSL’s ultimate parent company, Link Administration Holdings Limited (Link Group).
If the scheme is not implemented, Link Group will not make the voluntary contribution of £60m and LFSL would dispute all liability to scheme creditors.
The FCA considers that the scheme offers investors the quickest and best chance to obtain a better outcome than might be achieved by any other means and as such is encouraging investors to consider it.
LFSL expects an initial distribution to be made to scheme creditors of between £183.5m and £200m in the first quarter of 2024 if the scheme is approved.
An important step for investors
A spokesperson for LFSL said: “We are pleased that the court has agreed that the scheme can proceed to a vote. This is another important step forward in the process of ensuring investors in the fund at the point of its suspension (and their successors and transferees) can receive payments, much sooner and with more certainty than under any alternative arrangements.
“LFSL believes that the terms of the scheme, if implemented, will materially enhance the amount of redress available to scheme creditors from LFSL, in comparison to the position had LFSL not entered into a settlement with the FCA, and the scheme had not been proposed.
“Details of the scheme meeting and how to vote were release on 20 October 2023, and we encourage all eligible investors to have their say by voting. They will be able to do so online, by email, post, telephone and at the scheme meeting itself and we have put in place both support and guidance to help them through the process. We will continue to ensure that investors are provided with all the information they need to make an informed decision.”
Fund manager Neil Woodford was forced to suspend his flagship fund – Woodford Equity Income Fund – on 3 June 2019 as he couldn’t meet a surge in redemption requests following a period of poor performance.
In October 2019, the fund’s administrators confirmed the £3bn fund would be wound-up with cash returned to investors “as soon as possible”. To date, £2.56bn has already been distributed from the £3.6bn value of the fund.