EGL52000 - Introduction to joint ventures and group companies with minority investors: meaning of group company with significant minority shareholders

The EGL features various rules to deal with situations where a subsidiary member of a group that undertakes electricity generation, including by a relevant subsidiary, has one or more significant minority shareholders.

A significant minority shareholder is one that holds a 10% or greater interest in a group company, other than the parent company of the group, based on applying any of the following measures –

• entitlement to the company’s profits available for distribution to equity holders,
• entitlement to the company’s assets available for distribution to equity holders on a winding up, or
• ownership of the company’s ordinary share capital.

F(2)A23/S307 applies the rules for group relief in Part 5 of CTA 2010 for the purposes of determining: who is an equity holder in a company and how to assess entitlement to profits or assets, and how to trace through indirect holdings. They also apply the rules to companies without share capital and adapt the rules where a group structure includes other entities or arrangements.

A relevant subsidiary of a company is a 75% subsidiary of:

• that company,
• a 75% subsidiary of that company,
• a 75% subsidiary of a 75% subsidiary of that company, and so on.

There are three sets of rules that apply to significant minority shareholders:

• A group may elect for a group company to bear its own share of the group’s EGL liability, F(2)A23/S290. See EGL54000.
• To take in account arrangements of a significant minority shareholder in relation to generation supplied through them, F(2)A23/S296 & F(2)A23/S297. The latter rules largely replicate the approach to generation supplied to members of a joint venture in F(2)A23/S294 & F(2)A23/S295. See EGL62000+ onwards.
• To elect for the company to be treated as transparent as an alternative to the rules mentioned in the above bullet, F(2)A23/S300 & F(2)A23/S301. See EGL64000+.