If a company that has only one class of ordinary share has issued ordinary shares on which investors expect to obtain EIS relief and subsequently changes its articles to create a new class of share that ranks below the EIS shares on a winding up, does that create a preference on adoption of the new articles? | Legal Guidance

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If a company that has only one class of ordinary share has issued ordinary shares on which investors expect to obtain EIS relief and subsequently changes its articles to create a new class of share that ranks below the EIS shares on a winding up, does that create a preference on adoption of the new articles? Alternatively, does the preference only arise when the new class of shares are actually issued (rather than when the articles are adopted)?

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Published on: 16 November 2021

As explained in Practice Note: EIS—conditions for relief: issued Shares, the funds raised and the arrangements in general, one of the conditions for Enterprise Investment Scheme (EIS) relief to be obtained, under section 173(2)(aa) of the Income Tax Act 2007 (ITA 2007), is that the shares that are issued do not carry, at any time during Period B ‘any present or future preferential right to a company’s assets on its Winding up’. Period B is defined in ITA 2007, s 159(3), as the date starting from the date the shares are issued and finishing three years later (or in certain circumstances three years after the

Jurisdiction(s):

United Kingdom

Key definition:

Ordinary shares definition

What does Ordinary shares mean?

Securities which represent an ownership interest in a company.

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Q&As

Key definition:

Ordinary shares definition

What does Ordinary shares mean?

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