Application of the Loan relationship rules

50/50 corporate shareholders want to write off their equal loans to their JV company

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Our clients company owns 50% of a joint venture company with the other 50% being owned by another corporate.

The joint venture is ran by four directors, two from each parent company.

I have read that the control test can be taken as plural but does the acting in concert on management decisions constitute control?

The loans are identical amounts to each parent company and represented the original start up working capital.

The shareholders do not want to convert the loans to shares. 

Has anyone encountered this same situation before and can point us to the relevant legislation in support of this?

     

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By Ruddles
18th Aug 2017 12:00

The relevance of "person" being singular or plural is to the consideration of whether or not two companies are under common control. It is not relevant to the question of whether one company controls another.

Absent any document or agreement to the contrary, neither company that holds 50% of another company will control that other company (and will not therefore be connected with it for LR purposes).

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