The Gazette 1980

JULY-AUGUST

19

GAZETTE

effect of the substitution of the expression "issued share capital" in subsections (5) to (10) of S.156 Corporation Tax Act 1976 for "ordinary share capital": Canada Safeway Ltd. vs. IRC(\913) Ch. 374. The effect of S. 19(2) in the new legislation will be apparént on comparing Diagrams (II) and (III) below: 0D A 1 X | D | In this instance, the holding company (A) is the "beneficial owner" of 90 per cent of the "issued share capital" of the "intermediary" (B), even though its holding is confined to non-voting, non- participating preference shares. Another company (X) which is not associated with A in any way holds the entire equity share capital of B, entitling it both to the entire voting power and also to the surplus assets of B on a winding up, yet holds only 10 per cent of the "issued share capital" of B. B in turn has a wholly owned subsidiary D. For the purposes of S.19(2), A is treated as the "beneficial owner" of 90 per cent of the "issued share capital" of D, A being the beneficial owner of 90 per cent of the "intermediary" B, which in turn is the beneficial owner of 100 per cent of the issued share capital of D. FORMING A COMPANY? Why Worry? The Law Society provides a quick service based on a standard form of Memorandum and Articles of Association. Where necessary the standard form can be amended, at an extra charge, to suit the special requirements of any individual case. In addition to private companies limited by shares, the service will also form — • Unlimited companies. • Companies limited by guarantee. • Shelf companies, company seals and record books are available at competitive rates. 900 Prefs. 100 Ords. 1

( H I)

1X1 900 Prefs.

100 Ords.

i

1

1

I

1

100 Ords.

900 Prefs.

|

Suppose, however, that the share structure of D is the same as that of B, the preference share capital of B being in the beneficial ownership of A, the preference share capital of D being in the beneficial ownership of B, and the equity share capital of both B and D being in the beneficial ownership of X. In such a case, A would be treated under S. 19(2) as the beneficial owner of only 81 per cent of the issued share capital of D since it would be the beneficial owner of 90 per cent of the issued share capital of the intermediary B, which itself would be the beneficial owner of 90 per cent of the issued share capital of D. As already mentioned, the principle outlined above applies through any number of subsidiaries and sub subsidiaries. For example:—

(IV)

m X

m

.

B',

950 Prefs.

j

50 Ords.

J j

950~ PrefsT

Pi

]"" " 50 Ords.

J

In this instance, the share structure of B and D is the same as in Diagram (III) above, as is the ownership of the issued share capital of each, except that the ratio of preference share capital to ordinary share capital in B and D is in this case 950 to 50 instead of 900 to 100, and D has a wholly owned subsidiary E. Under S.19(2) in the new legislation A would be treated as the beneficial owner of 90.25 per cent of the issued share capital of E. Tracing one's way through the "chain of intermediaries", A would be the beneficial owner of 95 per cent of the issued share capital of B. B would be the beneficial owner of 95 per cent of the issued share capital of D, with the consequence that A would be treated for the purposes of para. 4 as the beneficial owner of 95 per cent of 95 per cent of the issued share capital of D ( 90.25 per cent of the issued share capital of D). D would be the beneficial owner of 100 per cent of the issued share capital of E, with the consequence that A would be treated as the beneficial owner of 90.25 per ccnt of the issued share capital of E. A convcvancc or transfer by A to E would therefore qualify for relief. In passing, it may be pertinent to remark that the draftsman has inserted the words "at the time of the

Full information is available from: COMPANY FORMATION SERVICE INCORPORATED LAW SOCIETY OF IRELAND BLACKHALL PLACE, DUBLIN. Tel. 710711. Telex 31219 ILAW EI.

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