Part 5

Enterprise investment scheme
Chapter 2

The investor

Meaning of connection with issuing company

Persons interested in capital etc of company
170
1
An individual is connected with the issuing company if the individual directly or indirectly possesses or is entitled to acquire more than 30% of—
a
the ordinary share capital of the company or any subsidiary of the company,
b
the loan capital and issued share capital of the company or any such subsidiary, or
c
the voting power in the company or any such subsidiary.
2
An individual is connected with the issuing company if the individual directly or indirectly possesses or is entitled to acquire such rights as would—
a
in the event of the winding up of the company or any subsidiary of the company, or
b
in any other circumstances,
entitle the individual to receive more than 30% of the assets of the company or subsidiary (“the company in question”) which would then be available for distribution to equity holders of the company in question.
3
For the purposes of subsection (2)—
a
the persons who are equity holders of the company in question, and
b
the percentage of the assets of the company in question to which the individual would be entitled,
are determined in accordance with paragraphs 1 and 3 of Schedule 18 to ICTA.
4
In making that determination—
a
references in paragraph 3 of that Schedule to the first company are to be read as references to an equity holder, and
b
references in that paragraph to a winding up are to be read as including references to any other circumstances in which assets of the company in question are available for distribution to its equity holders.
5
An individual is not connected with a company merely because one or more shares in the company are held by the individual or by an associate of the individual, at a time when the company—
a
has not issued any shares other than subscriber shares, and
b
has not begun to carry on, or make preparations for carrying on, any trade or business.
6
An individual is connected with the issuing company if the individual has control of the issuing company or of any subsidiary of that company.
7
In this section “subsidiary”, in relation to the issuing company, means a company which at any time in period A is a 51% subsidiary of the issuing company, whether or not it is such a subsidiary while the individual concerned has, or is entitled to acquire, such capital, voting power, rights or control as are mentioned in this section.
8
For the purposes of this section the loan capital of a company is treated as including any debt incurred by the company—
a
for any money borrowed or capital assets acquired by the company,
b
for any right to receive income created in favour of the company, or
c
for consideration the value of which to the company was (at the time when the debt was incurred) substantially less than the amount of the debt (including any premium on it).
9
For the purposes of this section—
a
an individual is treated as entitled to acquire anything which the individual is entitled to acquire at a future date or will at a future date be entitled to acquire, and
b
there is attributed to any individual any rights or powers of any other person who is an associate of the individual.
10
In determining for the purposes of this section whether an individual is connected with a company, no debt incurred by—
a
the company, or
b
any subsidiary of the company,
by overdrawing an account with a person carrying on a business of banking is to be treated as loan capital of the company or subsidiary if the debt arose in the ordinary course of that business.