Section 413(10).
1(1)For the purposes of section 413(7) to (9) and this Schedule, an equity holder of a company is any person who—
(a)holds ordinary shares in the company, or
(b)is a loan creditor of the company in respect of a loan which is not a normal commercial loan,
and any reference in that section to profits or assets available for distribution to a company’s equity holders does not include a reference to any profits or assets available for distribution to any equity holder otherwise than as an equity holder.
(2)For the purposes of sub-paragraph (1)(a) above “ordinary shares” means all shares other than fixed-rate preference shares.
(3)In this Schedule “fixed-rate preference shares” means shares which—
(a)are issued for consideration which is or includes new consideration; and
(b)do not carry any right either to conversion into shares or securities of any other description or to the acquisition of any additional shares or securities; and
(c)do not carry any right to dividends other than dividends which—
(i)are of a fixed amount or at a fixed rate per cent. of the nominal value of the shares, and
(ii)represent no more than a reasonable commercial return on the new consideration received by the company in respect of the issue of the shares; and
(d)on repayment do not carry any rights to an amount exceeding that new consideration except in so far as those rights are reasonably comparable with those general for fixed dividend shares listed in the Official List of the Stock Exchange.
(4)Subsection (7) of section 417 shall apply for the purposes of sub-paragraph (1)(b) above as it applies for the purposes of Part XI, but with the omission of the reference to subsection (9) of that section.
(5)In sub-paragraph (1)(b) above “normal commercial loan” means a loan of or including new consideration and—
(a)which does not carry any right either to conversion into shares or securities of any other description or to the acquisition of additional shares or securities; and
(b)which does not entitle that loan creditor to any amount by way of interest which depends to any extent on the results of the company’s business or any part of it or on the value of any of the company’s assets or which exceeds a reasonable commercial return on the new consideration lent; and
(c)in respect of which the loan creditor is entitled, on repayment, to an amount which either does not exceed the new consideration lent or is reasonably comparable with the amount generally repayable (in respect of an equal amount of new consideration) under the terms of issue of securities listed in the Official List of the Stock Exchange.
(6)Notwithstanding anything in sub-paragraphs (1) to (5) above but subject to sub-paragraph (7) below, where—
(a)any person has, directly or indirectly, provided new consideration for any shares or securities in the company, and
(b)that person, or any person connected with him, uses for the purposes of his trade assets which belong to the company and in respect of which there is made to the company—
(i)a first-year allowance within the meaning of Chapter I of Part III of the [1971 c. 68.] Finance Act 1971 (“the 1971 Act”) in respect of expenditure incurred by the company on the provision of machinery or plant;
(ii)a writing-down allowance within the meaning of Chapter II of Part I of the 1968 Act or, as the case may be, Chapter I of Part III of the 1971 Act in respect of expenditure incurred by the company on the provision of machinery or plant; or
(iii)an allowance under section 91 of the 1968 Act in respect of expenditure incurred by the company on scientific research;
then, for the purposes of this Schedule, that person, and no other, shall be treated as being an equity holder in respect of those shares or securities and as being beneficially entitled to any distribution of profits or assets attributable to those shares or securities.
(7)In any case where sub-paragraph (6) above applies in relation to a bank in such circumstances that—
(a)the only new consideration provided by the bank as mentioned in paragraph (a) of that sub-paragraph is provided in the normal course of its banking business by way of a normal commercial loan as defined in sub-paragraph (5) above; and
(b)the cost to the company concerned of assets falling within paragraph (b) of that sub-paragraph which are used as mentioned in that paragraph by the bank or a person connected with the bank is less than the amount of that new consideration,
references in sub-paragraph (6) above, other than the reference in paragraph (a), to shares or securities in the company shall be construed as references to so much only of the loan referred to paragraph (a) above as is equal to the cost referred to in paragraph (b) above.
(8)In this paragraph “new consideration” has the same meaning as in section 254 and any question whether one person is connected with another shall be determined in accordance with section 839.
2(1)Subject to the following provisions of this Schedule, for the purposes of section 413(7) to (9) the percentage to which one company is beneficially entitled of any profits available for distribution to the equity holders of another company means the percentage to which the first company would be so entitled in the relevant accounting period on a distribution in money to those equity holders of—
(a)an amount of profits equal to the total profits of the other company which arise in that accounting period (whether or not any of those profits are in fact distributed); or
(b)if there are no profits of the other company in that accounting period, profits of £100;
and in the following provisions of this Schedule that distribution is referred to as “the profit distribution”.
(2)For the purposes of the profit distribution, it shall be assumed that no payment is made by way of repayment of share capital or of the principal secured by any loan unless that payment is a distribution.
(3)Subject to sub-paragraph (2) above, where an equity holder is entitled as such to a payment of any description which, apart from this sub-paragraph, would not be treated as a distribution, it shall nevertheless be treated as an amount to which he is entitled on the profit distribution.
3(1)Subject to the following provisions of this Schedule, for the purposes of section 413(7) to (9) the percentage to which one company would be beneficially entitled of any assets of another company available for distribution to its equity holders on a winding-up means the percentage to which the first company would be so entitled if the other company were to be wound up and on that winding-up the value of the assets available for distribution to its equity holders (that is to say, after deducting any liabilities to other persons) were equal to—
(a)the excess, if any, of the total amount of the assets of the company, as shown in the balance sheet relating to its affairs as at the end of the relevant accounting period, over the total amount of those of its liabilities as so shown which are not liabilities to equity holders as such; or
(b)if there is no such excess or if the company’s balance sheet is prepared to a date other than the end of the relevant accounting period, £100.
(2)In the following provisions of this Schedule a winding-up on the basis specified in sub-paragraph (1) above is referred to as “the notional winding-up”.
(3)If, on the notional winding-up, an equity holder would be entitled as such to an amount of assets of any description which, apart from this sub-paragraph, would not be treated as a distribution of assets, it shall nevertheless be treated, subject to sub-paragraph (4) below, as an amount to which the equity holder is entitled on the distribution of assets on the notional winding up.
(4)If an amount (“the returned amount”) which corresponds to the whole or any part of the new consideration provided by an equity holder of a company for any shares or securities in respect of which he is an equity holder is applied by the company, directly or indirectly, in the making of a loan to, or in the acquisition of any shares or securities in, the equity holder or any person connected with him, then, for the purposes of this Schedule—
(a)the total amount referred to in sub-paragraph (1)(a) above shall be taken to be reduced by a sum equal to the returned amount; and
(b)the amount of assets to which the equity holder is beneficially entitled on the notional winding-up shall be taken to be reduced by a sum equal to the returned amount.
(5)In sub-paragraph (4) above “new consideration” has the same meaning as in section 254 and any question whether one person is connected with another shall be determined in accordance with section 839.
4(1)This paragraph applies if any of the equity holders—
(a)to whom the profit distribution is made, or
(b)who is entitled to participate in the notional winding-up,
holds, as such an equity holder, any shares or securities which carry rights in respect of dividend or interest or assets on a winding-up which are wholly or partly limited by reference to a specified amount or amounts (whether the limitation takes the form of the capital by reference to which a distribution is calculated or operates by reference to an amount of profits or otherwise).
(2)Where this paragraph applies there shall be determined—
(a)the percentage of profits to which, on the profit distribution, the first company referred to in paragraph 2(1) above would be entitled, and
(b)the percentage of assets to which, on the notional winding-up, the first company referred to in paragraph 3(1) above would be entitled,
if, to the extent that they are limited as mentioned in sub-paragraph (1) above, the rights of every equity holder falling within that sub-paragraph (including the first company concerned if it is such an equity holder) had been waived.
(3)If, on the profit distribution, the percentage of profits determined as mentioned in sub-paragraph (2)(a) above is less than the percentage of profits determined under paragraph 2(1) above without regard to that sub-paragraph, the lesser percentage shall be taken for the purposes of section 413(7) to (9) to be the percentage of profits to which, on the profit distribution, the first company referred to in paragraph 2(1) above would be entitled as mentioned in that paragraph.
(4)If, on the notional winding-up, the percentage of assets determined as mentioned in sub-paragraph (2)(b) above is less than the percentage of assets determined under paragraph 3(1) above without regard to that sub-paragraph, the lesser percentage shall be taken for the purposes of section 413(7) to (9) to be the percentage to which, on the notional winding-up, the first company mentioned in paragraph 3(1) above would be entitled of any assets of the other company available for distribution to its equity holders on a winding-up.
5(1)This paragraph applies if, at any time in the relevant accounting period, any of the equity holders—
(a)to whom the profit distribution is made, or
(b)who is entitled to participate in the notional winding-up,
holds, as such an equity holder, any shares or securities which carry rights in respect of dividend or interest or assets on a winding-up which are of such a nature (as, for example, if any shares will cease to carry a right to a dividend at a future time) that if the profit distribution or the notional winding-up were to take place in a different accounting period the percentage to which, in accordance with paragraphs 1 to 4 above, that equity holder would be entitled of profits on the profit distribution or of assets on the notional winding-up would be different from the percentage determined in the relevant accounting period.
(2)Where this paragraph applies, there shall be determined—
(a)the percentage of profits to which, on the profit distribution, the first company referred to in paragraph 2(1) above would be entitled, and
(b)the percentage of assets to which, on the notional winding-up, the first company referred to in paragraph 3(1) above would be entitled,
if the rights of the equity holders in the relevant accounting period were the same as they would be in the different accounting period referred to in sub-paragraph (1) above.
(3)If in the relevant accounting period an equity holder holds, as such, any shares or securities in respect of which arrangements exist by virtue of which, in that or any subsequent accounting period, the equity holder’s entitlement to profits on the profit distribution or to assets on the notional winding-up could be different as compared with his entitlement if effect were not given to the arrangements, then for the purposes of this paragraph—
(a)it shall be assumed that effect would be given to those arrangements in a later accounting period, and
(b)those shares or securities shall be treated as though any variation in the equity holder’s entitlement to profits or assets resulting from giving effect to the arrangements were the result of the operation of such rights attaching to the shares or securities as are referred to in sub-paragraph (1) above.
In this sub-paragraph “arrangements” means arrangements of any kind whether in writing or not.
(4)Sub-paragraph (3) and (4) of paragraph 4 above shall apply for the purposes of this paragraph as they apply for the purposes of that paragraph and, accordingly, references therein to sub-paragraphs (2)(a) and (2)(b) of that paragraph shall be construed as references to sub-paragraphs (2)(a) and (2)(b) of this paragraph.
(5)In any case where paragraph 4 above applies as well as this paragraph, that paragraph shall be applied separately (in relation to the profit distribution and the notional winding-up)—
(a)on the basis specified in sub-paragraph (2) above, and
(b)without regard to that sub-paragraph,
and sub-paragraphs (3) and (4) of that paragraph shall apply accordingly in relation to the percentages so determined as if for the word “lesser” there were substituted the word “lowest”.
6For the purposes of section 413(7) to (9) and paragraphs 2 to 5 above—
(a)the percentage to which one company is beneficially entitled of any profits available for distribution to the equity holders of another company, and
(b)the percentage to which one company would be beneficially entitled of any assets of another company on a winding-up,
means the percentage to which the first company is, or would be, so entitled either directly or through another body corporate or other bodies corporate or partly directly and partly through another body corporate or other bodies corporate.
7(1)In this Schedule “the relevant accounting period” means—
(a)in a case falling within subsection (7) of section 413, the accounting period current at the time in question; and
(b)in a case falling within subsection (8) of that section, the accounting period in relation to which the share in the consortium falls to be determined.
(2)For the purposes of this Schedule, a loan to a company shall be treated as a security, whether or not it is a secured loan, and, if it is a secured loan, regardless of the nature of the security.