Finance Act 1967

Close company: 35 per cent. test for quoted shares

6 (1) In paragraph 1(3) of Schedule 18 to the [1965 c. 25.] Finance Act 1965 (under which certain companies with quoted shares are not close companies) " beneficially held by the public " shall be construed in accordance with this paragraph, and a corresponding construction shall be given to the reference to shares which have been allotted unconditionally to, or acquired unconditionally by, the public.

(2) Shares shall be deemed to be beneficially held by the public if, and only if, sub-paragraph (3) below so provides, and if they are not within the exceptions in paragraph (a), (b) or (c) of the said paragraph 1(3) (shares held by a director of the company or his associate or by certain other companies) or within the exception in sub-paragraph (4) below.

(3) Shares shall be deemed to be beneficially held by the public—

(a) if beneficially held by a company resident in the United Kingdom which is not a close company, or by a company not so resident which would not be a close company if it were so resident, or

(b) if held on trust for a fund or scheme approved under section 379 or section 388 of the [1952 c. 10.] Income Tax Act 1952 (superannuation funds and retirement schemes), or

(c) if they are not comprised in a principal member's holding.

(4) Shares shall not be deemed to be held by the public if held as part of any fund the capital or income of which is applicable or applied wholly or mainly for the benefit of, or of the dependants of, the employees or directors, or past employees or directors, of the company, or of any company within paragraph (b) or (c) of the said paragraph 1(3).

(5) In paragraphs (a), (b) and (c) of the said paragraph 1(3) references to shares held by any person include references to any shares the rights or powers attached to which could be attributed to that person under paragraph 3(3) of Schedule 18 to the Finance Act 1965.

(6) The said paragraph 1(3) shall not apply at any time when the total percentage of the voting power in the company possessed by all the principal members of the company exceeds 85 per cent.

(7) For the purposes of this paragraph a person is a principal member of a company if he possesses a percentage of the voting power in the company of more than 5 per cent. and, where there are more than five such persons, if he is one of the five persons who possess the greatest percentages or if, because two or more persons possess equal percentages of the voting power in the company, there are no such five persons, he is one of the six or more persons (so as to include those two or more who possess equal percentages) who possess the greatest percentages.

(8) In arriving at the voting power which a person possesses there shall be attributed to him any voting power which would be attributed to him for the purposes of paragraph 3 of Schedule 18 to the [1965 c. 25.] Finance Act 1965 (definition of control) by sub-paragraphs (3) and (4) of that paragraph (nominees, controlled companies and associates).

(9) A principal member's holding consists of the shares which carry the voting power possessed by him.

(10) This paragraph shall be deemed to have come into force on 11th April 1967.