CG58641 - Co.purchases own shares: capital treatment: Condition A 바카라 사이트“ reduction of seller바카라 사이트™s interest

CTA10/S1037 Requirement as to reduction of seller바카라 사이트™s interest as shareholder

If, immediately after the company purchases its own shares, the seller still holds an interest as a shareholder, it must be substantially reduced. The seller바카라 사이트™s interest includes the combined interest of any associates of the seller.

Associates, for the purpose of this part of the Act, are defined under CTA10/S1059. They include, amongst others:

  • Spouses living together
  • Civil partners of each other living together
  • Person under age of 18 and his/her parents
  • A person and a company he/she is connected with and includes any company controlled by that company
  • Personal representatives of a deceased person

The seller바카라 사이트™s interest is substantially reduced if, and only if, the seller바카라 사이트™s subsequent interest after the company purchases its own shares, is not more than 75% of the seller바카라 사이트™s prior interest.

The seller바카라 사이트™s prior interest means the total nominal value of the shares owned by the seller immediately before the purchase, expressed as a fraction of the issued share capital of the company at that time.

{#}The seller바카라 사이트™s subsequent interest means the total nominal value of the shares owned by the seller immediately after the purchase, expressed as a fraction of the issued share capital of the company at that time.

EXAMPLE

A company has issued share capital of 100 £1 ordinary shares and are held by

Mr Q 30
Mrs Q 5
Mr R 15
Mr S 25
Ms T 25
Total 100
  • Mr and Mrs Q are spouses
  • Mr R is the son of Mr and Mrs Q and is over the age of 18

The company wishes to purchase its own shares from Mr Q.

Mrs Q is an associate of Mr Q as she is his spouse so her shares are added to Mr Q바카라 사이트™s. Mr R is not an associate under CTA10/S1059 as he is over the age of 18 therefore his interest is not added. Therefore the aggregated interest for Mr Q is 35 shares 바카라 사이트“ 35/100 = 35%.

As it is before the purchase of own shares by the company, the prior interest is 35%. Once the company has acquired the shares, they are treated as being immediately cancelled so the share capital is now 70 £1 ordinary shares. Mr Q has no longer an interest in his own capacity but through an associate, Mrs Q, who has 5 shares. Therefore Mr Q바카라 사이트™s aggregate interest post purchase, the subsequent interest, is 5/70 = 7%.

75% of the prior interest of 35% is 26.25%. As the subsequent interest of 7% is not more than 26.25%, the substantial reduction test has been satisfied.

The minimum amount of shares that need to be repurchased so that the substantial reduction test is met can be calculated using:

A X B

4B-3A

where,

A = nominal value of the seller바카라 사이트™s prior interest

B = issued share capital prior to the company purchase of its own shares

The answer should be rounded up.