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Finance Act 1965

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2(1)Subject to sub-paragraph (3) below, references to a holding in a company refer to a holding of shares, securities or rights by virtue of which the holder may receive distributions made by the company, but so that a person's holdings of different classes, and a person's holdings of the same class acquired at different times, shall be treated as separate holdings.

(2)Holdings of shares, securities or rights which differ in the entitlements or obligations they confer or impose shall be regarded as holdings of different classes.

(3)References to a holding in a company shall not apply, unless the contrary intention appears, to a holding consisting of shares which satisfy the following conditions:—

(a)that they are fully paid and do not carry any right to dividends other than dividends at a rate per cent. of the nominal value of the shares which is fixed or fluctuates only with the standard rate of income tax ; and

(b)that the rights which they carry in respect of dividends and capital are comparable with those general for fixed-dividend shares quoted on stock exchanges in the United Kingdom; and

(c)that no part of the share capital represented by the shares has at any time been treated as paid up otherwise than by the receipt by the company of new consideration.

(4)Sub-paragraph (3) above shall not operate in relation to any acquisition of such a holding as is there mentioned if either—

(a)at the time of that acquisition dividends on the shares were more than twelve months in arrear and would or might become payable thereafter ; or

(b)as a sequel to or in contemplation of that acquisition or any related acquisition of a holding in the company (but before the making of the distribution which is in question under the principal section) there has been any alteration of the rights attached to the shares or, so as materially to affect those rights or the operation of those rights, any alteration of the rights attached to or comprised in holdings of any other class in the company. For purposes of this sub-paragraph " related acquisitions" are acquisitions by the same person or by persons acting in concert and acquisitions together comprised in arrangements made by any person.

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