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GAZETTE
JULY-AUGUST
19
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
900 Prefs.
100 Ords.
1
| 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.
Full information is available from:
COMPANY FORMATION SERVICE
INCORPORATED LAW SOCIETY OF
IRELAND
BLACKHALL PLACE, DUBLIN.
Tel. 710711. Telex 31219 ILAW EI.
( H I)
1X1
900 Prefs.
i
100 Ords.
1
1
I
900 Prefs.
|
100 Ords.
1
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
m
X
.
B',
950 Prefs.
j
50 Ords.
J
j
Pi
950~
PrefsT
]"" " 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
96