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Controlled company transferring assets at undervalue.
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35.—(1) If on or after the 6th day of April, 1974, a company which is a controlled company transfers an asset to any person otherwise than by way of a bargain made at arm's length and for a consideration of an amount or value less than the market value of the asset, an amount equal to the difference shall be apportioned among the issued shares of the company, and the holders of those shares shall be treated in accordance with the following provisions of this section.
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(2) For the purposes of the computation of a chargeable gain accruing on the disposal of any of those shares by the person owning them on the date of transfer, an amount equal to the amount so apportioned to that share shall be excluded from the expenditure allowable as a deduction under paragraph 3 (1) (a) of Schedule 1 from the consideration for the disposal.
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(3) If the person owning any of the said shares at the date of transfer is itself a controlled company, an amount equal to the amount apportioned to the shares so owned under subsection (1) to that controlled company shall be apportioned among the issued shares of that controlled company, and the holders of those shares shall be treated in accordance with subsection (2), and so on through any number of controlled companies.
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(4) (a) A controlled company means a company resident in the State—
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(i) in which the number of persons holding shares is not more than 50;
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(ii) which has not issued any of its shares as a result of a public invitation to subscribe for shares; and
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(iii) which is under the control of not more than 5 persons.
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(b) A company shall be deemed to be under the control of any persons where the majority of the voting power or shares is in the hands of those persons or nominees of those persons.
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(c) For the purposes of this subsection, a person and any persons with whom he is connected shall be treated as one person.
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(5) This section shall apply to a company falling within section 36 as it applies to a controlled company.
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