Corporation Tax Act, 1976

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Group relief: profits or assets available for distribution.

109.—(1) For the purposes of this Part, an equity holder of a company is any person who—

(a) holds ordinary shares in the company, or

(b) is a loan creditor of the company in respect of a loan which is not a normal commercial loan,

and any reference in that section to profits or assets available for distribution to a company's equity holders does not include a reference to any profits or assets available for distribution to any equity holder otherwise than as an equity holder.

(2) For the purposes of subsection (1) (a) “ordinary shares” means all shares other than fixed-rate preference shares.

(3) In this Part “fixed-rate preference shares” means shares which—

(a) are issued for consideration which is or includes new consideration; and

(b) do not carry any right either to conversion into shares or securities of any other description or to the acquisition of any additional shares or securities; and

(c) do not carry any right to dividends other than dividends which—

(i) are of a fixed amount or at a fixed rate per cent. of the nominal value of the shares, and

(ii) represent no more than a reasonable commercial return on the new consideration received by the company in respect of the issue of the shares; and

(d) on repayment do not carry any rights to an amount exceeding that new consideration except in so far as those rights are reasonably comparable with those general for fixed dividend shares quoted on a stock exchange in the State.

(4) Section 103 (7) (definition of “loan creditor” for purposes of provisions relating to close companies) shall apply for the purposes of subsection (1) (b) as it applies for the purposes of Part X, except that the proviso shall be omitted.

(5) In subsection (1) (b) “normal commercial loan” means a loan of or including new consideration and—

(a) which does not carry any right either to conversion into shares or securities of any other description or to the acquisition of additional shares or securities; and

(b) which does not entitle the loan creditor to any amount by way of interest which depends to any extent on the results of the company's business or any part of it or on the value of any of the company's assets or which exceeds a reasonable commercial return on the new consideration lent; and

(c) in respect of which the loan creditor is entitled, on repayment, to an amount which either does not exceed the new consideration lent or is reasonably comparable with the amount generally repayable (in respect of an equal amount of new consideration) under the terms of issue of securities quoted on a stock exchange in the State.

(6) Notwithstanding anything in subsections (1) to (5) but subject to subsection (7), where—

(a) any person has, directly or indirectly, provided new consideration for any shares or securities in the company, and

(b) that person, or any person connected with him, uses for the purposes of his trade assets which belong to the company and in respect of which there is made to the company any of the allowances specified in Part XIII or XIV, Chapter I of Part XV, Chapter II of Part XVI of the Income Tax Act, 1967 , section 22 of the Finance Act, 1971 , or section 2 , 3 , 6 or 8 of the Finance (Taxation of Profits of Certain Mines) Act, 1974 ,

then, for the purposes of this Part, that person, and no other, shall be treated as being an equity holder in respect of those shares or securities and as being beneficially entitled to any distribution of profits or assets attributable to those shares or securities.

(7) In any case where subsection (6) applies in relation to a bank in such circumstances that—

(a) the only new consideration provided by the bank as mentioned in subsection (6) (a) is provided in the normal course of its banking business by way of a normal commercial loan as defined in subsection (5); and

(b) the cost to the company concerned of the assets falling within subsection (6) (b) which are used as mentioned in that subsection by the bank or a person connected with the bank is less than the amount of that new consideration,

references in subsection (6), other than the reference in paragraph (a) thereof, to shares or securities in the company shall be construed as a reference to so much only of the loan referred to in paragraph (a) of this subsection as is equal to the cost referred to in paragraph (b) of this subsection.

(8) In this section “new consideration” has the same meaning as in Part IX and any question whether one person is connected with another shall be determined in accordance with section 157 (connected persons).