Finance Act, 1990

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Material interests in offshore funds.

65.—(1) In this Chapter references to a material interest in an offshore fund are references to such an interest in any of the following, namely—

(a) a company which is resident outside the State,

(b) a unit trust scheme the trustees of which are not resident in the State, and

(c) any arrangements which do not fall within paragraph (a) or (b), which take effect by virtue of the law of a territory outside the State and which, under that law, create rights in the nature of co-ownership (without restricting that expression to its meaning in the law of the State),

and any reference in this Chapter to an offshore fund is a reference to any such company, unit trust scheme or arrangements in which any person has an interest which is a material interest.

(2) Subject to the following provisions of this section, a person's interest in a company, unit trust scheme or arrangements is a material interest if, at the time when he acquired the interest, it could reasonably be expected that, at some time during the period of 7 years beginning at the time of his acquisition, he would be able to realise the value of the interest (whether by transfer, surrender or in any other manner).

(3) For the purposes of subsection (2), a person shall be deemed to be able to realise the value of an interest if he can realise an amount which is reasonably approximate to that portion which the interest represents (directly or indirectly) of the market value of the assets of the company or, as the case may be, of the assets subject to the scheme or arrangements.

(4) For the purposes of subsections (2) and (3)—

(a) a person shall be deemed to be able to realise a particular amount if he is able to obtain that amount either in money or in the form of assets to the value of that amount, and

(b) if at any time an interest in an offshore fund has a market value which is substantially greater than the portion which the interest represents, as mentioned in subsection (3), of the market value at that time of the assets concerned, the ability to realise such a market value of the interest shall not be regarded as an ability to realise such an amount as is referred to in that subsection.

(5) An interest in a company, scheme or arrangements shall be deemed not to be a material interest if it is either—

(a) an interest in respect of any loan capital or debt issued or incurred for money which, in the ordinary course of a business of banking, is lent by a person carrying on that business, or

(b) a right arising under a policy of insurance.

(6) Shares in a company falling within subsection (1) (a) (in this section referred to as “the overseas company”) shall not constitute a material interest if—

(a) the shares are held by a company and the holding of them is necessary or desirable for the maintenance and development of a trade carried on by the company or a company associated with it,

(b) the shares confer at least 10 per cent. of the total voting rights in the overseas company and a right, in the event of a winding up, to at least 10 per cent. of the assets of that company remaining after the discharge of all liabilities having priority over the shares,

(c) not more than ten persons hold shares in the overseas company and all the shares in that company confer both voting rights and a right to participate in the assets on a winding up, and

(d) at the time of its acquisition of the shares, the company had such a reasonable expectation as is referred to in subsection (2) by reason only of the existence of either or both—

(i) an arrangement under which, at some time within the period of 7 years beginning at the time of acquisition, that company may require the other participators to purchase its shares, and

(ii) provisions of either an agreement between the participators or the constitution of the overseas company under which the company will be wound up within a period which is, or is reasonably expected to be, shorter than the period referred to in subsection (2),

and in this paragraph “participators” means the persons holdings shares falling within paragraph (c).

(7) For the purposes of subsection (6) (a), a company is associated with another company if one of them has control of the other within the meaning of section 102 of the Corporation Tax Act, 1976 , or both of them are under the control, within the meaning of that section, of the same person or persons.

(8) An interest in a company falling within subsection (1) (a) shall be deemed not to be a material interest at any time when the following conditions are satisfied, namely—

(a) that the holder of the interest has the right to have the company wound up, and

(b) that, in the event of a winding up, the holder is, by virtue of the interest and any other interest which he then holds in the same capacity, entitled to more than 50 per cent. of the assets remaining after the discharge of all liabilities having priority over the interest or interests concerned.

(9) The market value of any asset for the purposes of this Chapter shall be determined in like manner as it would be determined for the purposes of the Principal Act except that, in the case of an interest in an offshore fund for which there are separate published buying and selling prices, section 49(5) of that Act shall apply with any necessary modifications for determining the market value of the interest for the purposes of this Chapter.