Freesteel Blog » Capital for Enterprise Fund is NOT an Enterprise Capital Fund

Capital for Enterprise Fund is NOT an Enterprise Capital Fund

Wednesday, August 31st, 2011 at 1:55 pm Written by:

I appeared to have made a fundamental error in mistaking a document published in March 2009 by Capital for Enterprise Limited entitled “guidance for Enterprise Capital Funds” as having anything to do with the Capital for Enterprise Fund (which bailed out Vero Software in December 2009).

Oh well.

Nevertheless, following my FOI request about the information they received, they supplied me with what appears to be a close approximation of an Investee Summary Sheet for that particular transaction, and disclosed that there were 38 of them in total.

These funds tend to keep their operations as secret as possible, and provided the following explanation for this confidentiality in my last Decision Notice

33. BIS has also provided the Commissioner with evidence of similar prejudice occurring in a comparable situation. BIS explained that a named Capital for Enterprise Fund portfolio company, suffered adverse publicity as a result of voluntary disclosure of information that related to the company by a Fund Manager. This is another fund similar to the ECF programme which receives some investment from the government. It explained that the disclosure resulted in damage to the fund and the investee company. In the aftermath of the press coverage, it stated that there was significant disruption to the business and diversion of management resources to reassure customers and other stakeholders as to the businesses viability. In addition following press scrutiny surrounding this investment there was a noticeable aversion by investee companies for it to be a matter of public record that they had received funding from the Capital for Enterprise Fund as they wanted to avoid similar scrutiny of their business and because there was clear reputational risk of undergoing such scrutiny. The Commissioner considers that whilst this relates to a different funding programme and different information was disclosed, this example provides some evidence as to the nature of the prejudice claimed occuring in this case. This is because the SMEs which apply for ECF investment are private companies which may not wish to come under public scrutiny and therefore may be detracted from applying for such funding programmes.

And what was the “named Capital for Enterprise Fund portfolio company” I had to ask? It was KeTech.

Creditors to Mandelson-backed KeTech face losses
A private company that received £2.75m from a Government-funded scheme set up by Lord Mandelson less than a year ago is to file for protection from its creditors.

Mandelson faces embarrassment over KeTech’s pension black hole
The Government’s investment arm has begun investigating how a taxpayer-funded scheme rescued a company without noticing that one of its subsidiaries had failed to pass on thousands of pounds of its employees’ pension contributions.

Oh, so the Capital for Enterprise Fund managers or related government operatives apparently failed in their diligence, which was only found out when the company entered into a sort of bankruptcy process in which creditors lost money.

…And that is your cited example to justify zero disclosure about these venture capital funds?

Come on.

I mean, the press scrutiny was primarily about the shortcomings in the official scrutiny by the financial professionals hired to oversee this case.

And that press scrutiny is then described to the Information Commissioner as a case of unwelcome outside disruption and reputational risk — which he accepted as reasonable!

Only in the financial sector can an administrative failure get converted into an intangible asset with such ease.

Why do these cock-ups keep morphing into successful conspiracies?

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