[F1809FZKVenture capital fundsU.K.
(1)Where a venture capital fund has a relevant interest in a trading company or the holding company of a trading group—
(a)any venture capital investment made for the purposes of the scheme in the company after the time the relevant interest was acquired (and before a relevant disposal) is to be regarded as having been made at the time the relevant interest was acquired, and
(b)any disposal for the purposes of the scheme of a venture capital investment in the company after that time is to be regarded as not being made until—
(i)a relevant disposal is made, or
(ii)the scheme director condition ceases to be met.
(2)For the purposes of subsection (1) a venture capital fund has a relevant interest in a company if —
(a)by virtue of its venture capital investments the fund has at least a 5% interest in the company, or
(b)venture capital investments held for the purposes of the scheme in the company have a value of more than £1 million.
(3)For the purposes of subsection (1) “relevant disposal” means a disposal which (apart from subsection (1)) has the effect that the venture capital fund has disposed of more than 80% of the greatest amount invested at any one time in the company for the purposes of the fund.
(4)In this Chapter, “venture capital fund” means an investment scheme in relation to which the condition in subsection (5) is met.
(5)The condition is that when the scheme starts to invest it is reasonable to suppose that over the investing life of the scheme—
(a)at least two-thirds of the total value invested for the purposes of the scheme will be invested in venture capital investments, and
(b)at least two-thirds of the total value invested for the purposes of the scheme will be invested in investments which are held for 40 months or more.
(6)In determining whether subsection (5)(b) is met in relation to an investment scheme, apply the rule in subsection (1) to the scheme.
(7)In this section, “venture capital investment”, in relation to an investment scheme, means an investment in a trading company or the holding company of a trading group where—
(a)at the time the investment is made the company is unlisted and is likely to remain so,
(b)at least 75%of the total value of the investment is invested in—
(i)newly issued shares or
(ii)newly issued securities convertible into shares,
(c)the investment is used in a trade carried on by the trading company or the trading group—
(i)to support its growth, or
(ii)for the development of new products or services,
and is not used directly or indirectly to acquire shares in the company which are not newly issued,
(d)if the investment is the first investment made in the company for the purposes of the scheme, the trading company or group has not carried on that trade for more than 7 years, and
(e)the scheme director condition is met.
(8)In this Chapter, the scheme director condition, in relation to an investment scheme and a company, is that—
(a)the scheme (or the scheme and one or more investment schemes acting together) are entitled to appoint a director (“the scheme director”) of—
(i)the company, or
(ii)a company which controls the company, and
(b)the scheme director is entitled to exercise rights within subsection (9).
(9)Those rights are rights which—
(a)are rights conferred under contractual arrangements—
(i)to which some or all of the investors in the company are parties, and
(ii)which it would be reasonable to suppose would not otherwise be capable of being exercised by the scheme director,
(b)relate to the conduct of the business and affairs of the company, and
(c)are at least equivalent to the rights which it is reasonable to suppose a prudent investor would have obtained on making an investment in the company at arm's length of the same size and nature as that held in the company for the purposes of the investment scheme.
(10)In determining whether the condition in subsection (2)(a) or (b) is met in relation to a venture capital fund, any share capital of a company which is held for the purposes of an associated investment scheme is to be regarded as held for the purposes of the venture capital fund.]
Textual Amendments
F1Pt. 13 Ch. 5F inserted (with effect in accordance with s. 37(4) of the amending Act) by Finance Act 2016 (c. 24), s. 37(2)