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ITA07/S285

The definition of ‘eligible shares� for the purposes of S274, (which differs from that at S273) changed in relation to accounting periods ending on or after 6 April 2011. The definition applicable depends on when the monies were raised by the VCT.

For shares issued before 6 April 2011, or issued after that date but funded from monies raised by the VCT before that date, or monies derived from monies raised before that date, ‘eligible shares� means shares in a company which:

• are comprised in the company’s ordinary share capital,
• carry no present or future preferential right to dividends or to the company’s assets in a winding up, and
• carry no present or future right to be redeemed.

For shares issued after 6 April 2011 funded out of monies raised by the VCT after that date, shares are ‘eligible� unless they carry -

• A present or future preferential right to the company’s assets on its winding up, or
• A present or future right to be redeemed, or
• A present or future preferential right to dividends where:

• The rights attaching to the share include scope for the amount of the dividend to be varied based on a decision taken by the company, the shareholder or any other person. Note: this exclusion covers only those shares which carry preferential rights and does not therefore prevent the voting of dividends in respect of non-preferential shares, nor does it prevent shareholders from choosing to waive a dividend payment should they wish to do so; or
• The right to receive dividends is ‘cumulativeâ€� - that is, where a dividend which has become payable is not in fact paid, the company is obliged to pay it a later time, normally once funds become available.