VCM12010 - The investment process: nature of the shares
ICTA/S289 (7); ITA/S173(2); ICTA/S842AA (14); ITA/S273; ITA/S285
TCGA92/SCH5B/PARA19 (1); FA00/SCH15/PARA35
For the EIS, relief is available only where the investor subscribes for shares which meet certain requirements. The shares must be ordinary shares which, throughout the three year period carry:
- no present or future preferential right to dividends,
- no present or future preferential right to the company's assets on its winding up, and
- no present or future right to be redeemed.
For the meaning of 'preferential right' see
VCM12030.
'Ordinary shares' means shares forming part of a company's
'ordinary share capital', which is itself defined in ICTA/S832 (1)
and ITA/S989 as all issued share capital, by whatever name called,
other than capital the holders of which have a right to a dividend
at a fixed rate but no other right to share in profits.
The rights carried by shares are usually as set out in the
company's Articles of Association or as determined by a resolution
of the company.
For the VCT scheme, the requirement for the
investor in the VCT is in terms of eligible shares and the period
is 5 years from the date of issue. In relation to the investments
made by a VCT only a proportion of the investment in a company has
to be in eligible shares (see
VCM62030) and the definition of
'eligible shares' does not refer to any particular period of time.
For the CVS, the same conditions apply as for
EIS.
