Interest restriction: related parties: 25% investment - attribution of rights and interests: persons acting together
The definition of 25% investment looks at the level of investment P has in an entity. This does not just include rights and interests held solely by P, however, and also takes into account rights and interests held by certain other people which are attributed to P.
Acting together is one of three ways in which rights and interests are attributed to P. So in determining the level of investment P has in another person (U), P is taken to have all the rights and interests of a third person (T) with whom P acts together in relation to U.
P ‘acts together’ with T in relation to U if any of the following are satisfied:
- For the purpose of influencing the conduct of U’s affairs, P is able to ensure T acts in accordance with their wishes (or vice versa), or T can reasonably be expected to act, or typically acts, in accordance with P’s wishes (or vice versa).
- P and T are party to an arrangement that it is reasonable to conclude is designed to affect the value of any of T’s equity in U.
- The same person manages some or all of the equity in U possessed by P and T.
However, P is not treated as acting together with T if the managing person does so as the operator of different collective investment schemes, and if the management of the schemes is not coordinated for the purpose of influencing U. The relevant terms for this exemption are given in Part 17 of the Financial Services and Markets Act (FSMA), 2000.
P has a 20% investment in U and T has a 10% investment in U. P and T are neither related to each other nor U (for example, both fail the 25% investment condition).
However, T is legally bound to act in accordance with P’s instructions, meaning P is able to secure that T acts in accordance with their wishes. P and T are therefore acting together under s465(4)(a)(i), and P will therefore be attributed the rights of T.