Associated companies - an easy one?

Associated companies - an easy one?

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Company has gross assets £1.5m. Net assets, after loan creditor company debt (£1m) of £500k. Loan creditor is not bank. It has some shares but not controlling interest. Does it control the company, ie are they associated?
David Lochhead

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By AnonymousUser
08th Dec 2006 07:43

ESC C9
Perhaps someone could also explain the application of the Concession?

Two independent sources of guidance (one being the Revenue manual) are worded exactly the same:

"In such cases, the ‘loan creditor’ relationship will not make the companies associated companies provided the ‘loan creditor’ company:

•is not a close company, or

•is a bona fide commercial loan creditor and there are no other current or prior connections between the relevant companies apart from the loans that give rise to control."

The way this second bullet point is written suggests that the connections are only relevant when considering the commercial test and that the Concession will apply to any open company, connected or otherwise.

However, the relevant part of the concession begins by saying it applies where there is or has been no connection and THEN says that in all cases that part applies subject to the close company/commercial tests. This implies that if there is/was a connection C9 does not apply regardless of whether either of the two tests are met.

What am I missing? Perhaps there should be a carriage return between "creditor" and "and" in the second bullet point of the guidance but it is the fact that both sources have it worded the same way that bothers me (unless of course one was lifted directly from the other, which I guess is a real possibility). In any event, what is the correct interpretation?

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