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The question of whether companies are connected continues to cause confusion. Two companies have some shareholders in common, but they have differing shareholdings and there is also a debt existing between them
Our client Z Ltd is owned by five unrelated shareholders – A B C D and E who own 20% of the voting shares each. X Ltd is owned by four of the same shareholders – A B C and D who each own 25% of the voting shares.
Are the companies associated for the purposes of the small companies rate? Three shareholders voting together are required to control each company but the combinations can be different.
More recently A and B have purchased the shares of E so each now owns 30% of Z Ltd. Consequently the two companies will not be associated because there are now different minimum controlling combinations – only two shareholders are required for Z Ltd but three for X Ltd.
In 2003 Z Ltd sold some trading stock and other...
