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commencement of tade ?

commencement of tade ?

Company is set up for generating electricity (windfarm) to sell to the grid.

When does the company commence trading (it is important because we are considering EIS which needs trading to start within 24 months of investment).

a) planning permission sought and feasibility studies undertaken

b) planning pemission received

c) machinery ordered and infrastructure put in place

d) connection to the grid and generation of electricty



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28th Jun 2012 16:07

Sorry for doing this...

a) Not tading.

b) Not tading.

c) Not tading.

d) Tading.

When the company begins to take in raw materials (wind) and turn out its product (negatively charged electrons). Per Birmingham Cattle By-Products (see BIM70510).

However, under EIS, aren't activities preparatory to the carrying on of the trade deemed to be trading. Not a loaded question. I don't know, and haven't checked.

EDIT: Now I've checked! And I see that you've still got an effective two year time limit from share issue in these circumstances.

Thanks (1)
By blok
28th Jun 2012 16:54


yes thanks, I had researched the Birmingham Cattle case which related to the production of sausages so slightly different but I agree the tading will start when the turbines start to turn with the wind.

with the EIS specifically - the way I see this panning out is that the 4 shareholders (not associated) subscribe for shares say 1 July 2012, thereafter  the company will need to be tading from 1 July 2014 in order that the issue of the shares qualify.  We then leave it 4 months and approach HMRC who will hopefully issue the EIS 2 + 3 forms. 

This is not ideal.

Would this work ? assuming that shareholders are inputing £200k each?

1 July 2012 subscribe for 4*£1 ord shares.  Introduce £200k each as DLA.

Fresh issue of £800k of ordinary shares just prior to tading commencing, satisfied by cancellation of the DLA.  Probably not work because the shares must be paid for in cash?  Agree that doesn't work?

Thanks (0)
28th Jun 2012 17:13

I agree

The shares need to be subscribed for in cash (as opposed to money, which would include the satisfaction of debt).

Reflecting on the trading point, I think there's probably a point between (c) and (d) when the trade commences. Once you've got your sausage making machine set up, and plenty of raw ingredients flying past, you're ready to go, irrespective of whether you've got any arrangements in place for selling the sausages (assuming, of course, there's known to be a demand for sausages).

Thanks (1)
By blok
28th Jun 2012 19:56

You are the man.

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