CTM60120 | Close companies: tests: entitled to acquire or secure

CTA2010/S454(2) (formerly ICTA88/S417 (1))

The words ‘entitled to acquire’ and ‘entitled to secure’ introduce the concept of a potential participator. So, for example, a person is a participator if, by means of a contractual right or by rights arising under a trust deed, they can:

• require a shareholder to transfer shares to that person,

or

• secure the issue to that person of unissued capital of the company, or

• secure that if the company makes a distribution or if a loan is redeemed by the company at a premium, that person has a share in the distribution or the premium.

Similarly, a person is a participator if by means of a contractual right or some other arrangement he can secure that income or assets of the company will be applied directly or indirectly for his benefit.

References to being ‘entitled to acquire’ or ‘entitled to secure’ apply where a person is presently entitled to acquire, etc, at a future date and where a person will at a future date be entitled to acquire, etc.