VCM62332 - VCT scheme: qualifying holdings: meaning of 'control'

ITA/S313(4) For the purposes of the VCT scheme ‘control' has the meaning given in ICTA88/S416 (2) - (6) (see CTM60200 onwards), subject to the following two modifications:

• rights in respect of relevant fixed-rate preference shares (see VCM62334) are ignored,
• rights of 'loan creditors' (see CTM60130) are ignored (but where a loan or a holding of loan stock is convertible into shares, the effect of these 'arrangements' must be considered in accordance with VCM62330).

Thus the particular tests for control by a person set out in ICTA88/S416 (2) cover that possession of, or entitlement to acquire:

• the greater part of the company's issued share capital, excluding any which consists of relevant fixed-rate preference shares,
• the greater part of the voting power in the company,
• such part of the company's issued share capital as would entitle the person to receive the greater part of the company's income if it were all distributed, ignoring for this purpose any entitlement in respect of relevant fixed-rate preference shares, and ignoring all income which would be distributed to the holders of such shares,
• such part of the company's issued share capital as would entitle the person to receive the greater part of the company's assets on a winding up, ignoring for this purpose any rights in respect of relevant fixed-rate preference shares, and ignoring all assets which would be distributed to the holders of such shares.

These modifications are unlikely to be of any significance in relation to control of a company by the investee company (see VCM15060) but are of considerable importance in relation to control of that company (see VCM62330), especially control of it by the VCT itself.