IFM22106 - Real Estate Investment Trust : Conditions and Tests: maximum shareholding: ‘holder of excessive rights’ (HoER) examples

The definition of ‘holder of excessive rights’ is set out in CTA2010/S553. (see IFM22105). Some examples are set out below. In them, C is a UK-REIT.

1. Company A uses nominee N to hold their 20% shareholding in C. C pays the dividend to N but N is required to pay that over to A. The person beneficially entitled to the dividend is A, N is looked through and A, not N, is identified as a HoER.

2. Company B holds 100% of the shares in A. B does not have beneficial entitlement (directly or indirectly) to C’s distributions. However, B controls indirectly more than 10% of C’s share capital. Companies A and B are therefore HoER. However if company B held 49% of the shares in A. B would not have beneficial entitlement (directly or indirectly) to C’s distributions or share capital and would not control indirectly 10% or more of the voting rights in C so B would not be a HoER.

3. Company A owns 8% of the shares in C, and A also owns 100% of the shares in company B, which in turn owns 4% of the shares in C. A owns directly 8% of the shares in C, and controls 4% indirectly. A therefore controls, directly and indirectly, 12% of the shares in C and is a HoER.

4. Company A owns 9% of the shares in C. A also owns 30% of Company B, which in turn owns 4% of the shares in C. A owns directly 9% of the shares in C, but because A is unlikely to be able to direct how B exercises its votes in respect of C, A’s proportion of the voting rights attached to the 4% of shares owned by B do not count as indirectly held by A and A is not a HoER.

5. Company A holds 50% of the shares in C. A fragments its holding into 6 special purpose vehicles (SPVs), each holding less than 10% of the shares. A controls indirectly 50% of the shares in C and is a HoER. The SPVs each have beneficial entitlement to shares and distributions of less than 10% and are not HoER.