Part 5Enterprise investment scheme

Chapter 3General requirements

The requirements

F1173ABMaximum risk finance investments during period B requirement

(1)

The requirement of this section applies if condition A or B is met.

(2)

Condition A is that—

(a)

a company becomes a 51% subsidiary of the issuing company at any time during period B,

(b)

all or part of the money raised by the issue of the relevant shares is employed for the purposes of a qualifying business activity which consists wholly or in part of a trade carried on by that company, and

(c)

that trade (or a part of it) was carried on by that company before it became a 51% subsidiary as mentioned in paragraph (a).

(3)

Condition B is that all or part of the money raised by the issue of the relevant shares is employed for the purposes of a qualifying business activity which consists wholly or in part of a trade which, during period B, becomes a relevant transferred trade.

(4)

The requirement of this section is that, at all times in period B, the total of the relevant investments made in the issuing company before the time in question (“the relevant time”) must not exceed—

(a)

if the issuing company is a knowledge-intensive company at the issue date (see section 252A), £20 million, and

(b)

in any other case, £12 million.

(5)

In subsection (4) the reference to relevant investments made in the issuing company includes—

(a)

any relevant investment made in any company that at any time before the relevant time has been a 51% subsidiary of the issuing company (including investments made in a company before it became such a subsidiary but, if it is not such a subsidiary at the relevant time, not investments made in it after it last ceased to be such a subsidiary),

(b)

any other relevant investment made in a company to the extent that the money raised by the investment has been employed for the purposes of a trade carried on by another company that has at any time before the relevant time been a 51% subsidiary of the issuing company (but, if it is not such a subsidiary at the relevant time, ignoring any money so employed after it last ceased to be such a subsidiary), and

(c)

any other relevant investments made in a company where—

(i)

the money raised by the investment has been employed for the purposes of a trade carried on by that company or another person, and

(ii)

after the investment was made, but before the relevant time, that trade (or a part of it) becomes a relevant transferred trade (see subsection (7)).

(6)

If only a proportion of the money raised by a relevant investment is employed for the purposes of a trade which became a relevant transferred trade, the reference in subsection (5)(c) to the relevant investment is to be read as a reference to the corresponding proportion of that investment.

(7)

Where—

(a)

before the relevant time, a trade is transferred—

(i)

to the issuing company,

(ii)

to a company that is at the relevant time, or has before that time been, a 51% subsidiary of the issuing company, or

(iii)

to a partnership of which a company within sub-paragraph (i) or (ii) is a member,

(including where it is transferred to a company within sub-paragraph (ii), or a partnership of which such a company is a member, before the company became such a subsidiary but, if the company is not such a subsidiary at the relevant time, not where it is transferred to such a company or partnership after the company last ceased to be such a subsidiary), and

(b)

the trade or a part of it was previously (at any time) carried on by another person,

the trade or part mentioned in paragraph (b) becomes a “ relevant transferred trade ” at the time it is transferred as mentioned in paragraph (a).

(8)

In this section—

the issue date” means the date on which the relevant shares are issued, and

relevant investment” has the meaning given by section 173A(3), and section 173A(4) and (5) (which determines when certain investments are made) applies for the purposes of this section;

and section 173A(6) and (7) (meaning of “trade” etc) applies for the purposes of this section as it applies for the purposes of section 173A.