Commentary

D3.110 Definition of a 'close company'—the 'winding-up' test

Corporate tax
Corporate tax | Commentary

D3.110 Definition of a 'close company'—the 'winding-up' test

Corporate tax | Commentary

D3.110 Definition of a 'close company'—the 'winding-up' test

This second test for determining whether a company is close looks at the rights of individuals on a notional winding-up. Provided it is not within one of the exemptions described in D3.113, a company (the relevant company) will be close if five or fewer participators, or participators who are directors, together possess or are entitled to acquire such rights as would on a notional winding up of a company entitle them to receive the greater part of the assets of that company available for distribution among the participators.

This test is applied first on the basis that loan creditors are included as participators and then on the basis that they are disregarded. The company is close if it satisfies the test on either basis1.

As with other tests, an attribution may be made to a participator of the rights of a nominee or associate of his or of a company which is controlled by him and his associates2 (see D3.103).

This winding up test is different from the winding up test used

To continue reading
View the latest version of this document, as well as thousands of others like it, sign in to TolleyLibrary or register for a free trial