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Version Superseded: 17/07/2014
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(1)This section applies for the purpose of determining the proportion to which a company (“company A”) would, at any time, be beneficially entitled of any assets available for distribution to the equity holders of another company (“company B”) on a winding up.
(2)The proportion is the proportion to which company A would, at that time, be beneficially entitled if company B were to be wound up and on that winding up (“the notional winding up”) the value of assets available for distribution to company B's equity holders were equal to—
(a)the assets amount minus the liabilities amount, or
(b)if the assets amount does not exceed the liabilities amount or if company B's balance sheet is prepared to a date other than the end of the relevant accounting period (see section 168), £100.
(3)The “assets amount” is the amount of company B's assets as shown in its balance sheet as at the end of the relevant accounting period.
(4)The “liabilities amount” is the amount of company B's liabilities as shown in that balance sheet but excluding liabilities to equity holders as such.
(5)If, on the notional winding up, an equity holder would be entitled as such to an amount of assets which (apart from this subsection) would not be a distribution of assets, the equity holder is nevertheless treated as entitled to the amount on the distribution of assets on the notional winding up.
(6)Subsection (7) applies if—
(a)an equity holder (“E”) of company B provided new consideration for any shares or securities in company B in relation to which E is an equity holder,
(b)company B makes a loan to E or any person connected with E or acquires shares or securities in E or any person so connected, and
(c)in making that loan or acquiring those shares or securities, company B applies, directly or indirectly, an amount (“the returned amount”) corresponding to the whole or any part of the new consideration.
(7)The following amounts are to be reduced by the returned amount—
(a)the assets amount, and
(b)the amount of assets to which E is beneficially entitled on the notional winding up.
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