Commentary

I8.318 Unquoted holdings over 25% but below 50%

IHT, trusts and estates

I8.318 Unquoted holdings over 25% but below 50%

I8.318 Unquoted holdings over 25% but below 50%

For reasons given in I8.316, valuation of holdings of this type will in many cases be unnecessary because of the higher rate of business relief.

The purchaser in the open market1 of a holding carrying over 25% but less than 50% of the votes would not control the company, so he would be unable to sell the company's business, or wind up the company and realise the assets. As he would not necessarily be a director, he could not expect to receive any directors' remuneration and he would not be in a position to limit the remuneration paid to the directors, or to determine the dividend policy. His main advantage over a holder of 25% or less of the voting shares is his power to block a special resolution, and his chance of acquiring a control holding by purchasing more shares—possibly under the pre-emption clause in the articles of association. HMRC did at one time point out that the business of private companies is not run by the passing of special resolutions and it could therefore be argued that there is no real nuisance value in the holding2. The holding can sometimes be important in special situations, such as those where the company needs to increase its borrowing powers. The purchaser would therefore be primarily interested in his prospective dividend, and he would take into account the past dividend record and any forecast made by the company.

Secondly, the purchaser would consider the

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