Section 513 | Conditions to be met for some securities

(1)Section 512 does not apply to an investment by virtue of subsection (1)(b), (c) or (d) of that section unless—

(a)condition A is met in relation to the securities, and

(b)if the securities are shares or debenture stock, condition B is met in relation to the securities.

But see subsection (3) of this section.

(2)In the case of an investment in securities issued by a company which is incorporated, section 512 does not apply to the investment by virtue of subsection (1)(i) of that section unless—

(a)condition A is met in relation to the securities,

(b)if the securities are shares or debenture stock, condition B is met in relation to the securities, and

(c)condition C is met in relation to the company.

But see subsection (3) of this section.

(3)Conditions A and B need not be met if the securities are traded or quoted on a money market supervised by the government or a governmental body of any territory or part of a territory.

(4)Condition A is that the securities are traded or quoted on—

(a)a recognised investment exchange (as defined in section 285(1) of FISMA 2000), or

(b)an investment exchange which constitutes the principal or only market established in a territory on which securities admitted to official listing are dealt in or traded.

(5)Condition B is that—

(a)the securities are fully paid up,

(b)the terms of the issue of the securities require them to be fully paid up within the period of 9 months beginning with the day after the day on which they are issued, or

(c)the securities are shares issued with no nominal value.

(6)Condition C is that—

(a)throughout the last business day before the investment day, the company has total issued and paid up share capital of at least £1,000,000 (or the equivalent of £1,000,000 in some other currency), and

(b)in each of the 5 years immediately before the calendar year in which the investment day falls, the company paid a dividend on all the shares issued by the company (excluding any shares issued after the dividend was declared and any shares which by their terms of issue did not rank for dividend for that year).

(7)For the purposes of the words in brackets in subsection (6)(a) use the exchange rate prevailing in the United Kingdom at the close of business on the last business day before the investment day.

(8)For the purposes of subsection (6)(b) a company formed—

(a)to take over the business of another company or other companies, or

(b)to acquire the securities of, or control of, another company or other companies,

is treated as having paid a dividend in any year in which a dividend has been paid by the other company or all of the other companies (as the case may be).

(9)It is irrelevant that the company is formed for other purposes in addition to those mentioned in paragraph (a) or (b) of subsection (8).

(10)In this section—

“business day” means, in relation to an investment, a business day in the place where the investment is made, and

“the investment day” means, in relation to an investment, the day on which the investment is made.