Commentary

I8.315 Unquoted holdings of 75% or over

IHT, trusts and estates

I8.315 Unquoted holdings of 75% or over

I8.315 Unquoted holdings of 75% or over

The introduction of the higher rate of business relief of 100%1, which since 5 April 1996 has applied to all unquoted shares qualifying for relief2, means that in many cases it will not be necessary to value unquoted holdings with 75% or more of the votes. There may, however, still be some holdings which have to be valued, for example because the transferor has not owned them for the requisite two years before a transfer occurs3, or the company is a property or investment holding company4, or owns5 excepted assets.

A holding carrying 75% of the votes entitles the owner to pass a special resolution, by which he can stop trading and liquidate the company, carry on trading, change the nature of the business (subject to possible limitation by the memorandum of association), alter the composition of the board, and so on, as he pleases. The value of such a holding will be the going concern value or, if it is higher, the break-up value, although a court may not consider it proper to assume an anti-social act like liquidation unless losses were being, or likely to be, made.

The value of any holding of shares is the price a hypothetical purchaser will pay in the open market, and this price must be based upon the benefits he can expect from the ownership of his shares by way of remuneration, dividends or capital profit. Even a controlling shareholder can only continue to trade or liquidate

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