Section 688: Receipt of consideration representing company’s assets, future receipts or trading stock (circumstance C)
2051.This section is based on sections 704 B, 704 C and 709 of ICTA.
2052.Subsection (1) requires that three conditions set out in subsections (2), (3) and (6) must be satisfied if section 688 is to apply to a person (A).
2053.Subsection (2) is about the receipt of consideration. It prescribes what the consideration must be if section 688 is to apply to A.
2054.Subsection (3) requires that, if section 688 is to apply to a receipt, it must be in consequence of a transaction whereby another person (B) – to summarise – either receives an abnormal amount by way of dividend or becomes entitled to a deduction in calculating profits or gains in respect of B’s securities. Subsection (3) retains the source legislation’s connective “whereby”, which has been the subject of judicial comment.
2055.Subsection (4) prescribes what B’s entitlement (in subsection (3)) must arise in connection with. On the rewrite of section 709(3)(a) and (b) in this context, see the comment on section 686(3).
2056.Section 709(3)(c) of ICTA (meaning of “consideration”) is rewritten for the purposes of section 688 in subsection (8). Subsection (8) extends “consideration” to include non-contractual receipts of money or money’s worth.
