Reliefs: employee-ownership trusts: conditions: the 'controlling interest requirement'
A settlement meets the ‘controlling interest requirement’ if
- the trustees hold more than 50% of the ordinary share capital of C and have powers of voting on all questions affecting C which, if exercised, would yield a majority of the votes capable of being exercised on such questions,
- the trustees are entitled to more than 50% of the profits available for distribution to the equity holders of C.
- the trustees are entitled on a winding-up of C to more than 50% of the assets available for distribution to its equity holders, and
- there are no provisions in any agreement or instrument affecting the constitution or management of C, or its shares or securities, whereby the first to third conditions above could cease to be satisfied without the trustees’ consent.
The trustees of the Wasat Widgets Limited EOT own 70% of the ordinary share capital of Wasat Widgets Limited, which entitles them to 70% of the voting rights in matters affecting the company, to 70% of its profits available for distribution and, subject to the agreement mentioned below, to 70% of any assets in a winding up. There is an agreement in place, dated 8 July 2014, under which in specified situations the trustees are entitled to a fixed sum of £1 on the winding up of Wasat Widgets Limited. The existence of this agreement means that the trustees do not meet the ‘controlling interest requirement’ in relation to Wasat Widgets Limited.
In some circumstances rights associated with the trustees’ shares, and agreements which might cause the trustees to lose control of C, are disregarded for the purposes of the ‘controlling interest requirement’, see CG67875.
For more information on the definitions of terms relevant to the conditions under which trustees meet the ‘controlling interest requirement’ see CG67875.