I see the 5% test has been extended to “the profits available for distribution to the equity holders of the company” (as well as assets on a winding up).
Both make reference to ‘equity holders’ it would seem this includes non-cumulative preference shares according to HMRC’s recently published view (more like equity than debt). So even if a shareholder’s ordinary shares are not diluted to below 5% by nominal value due to the existence of such shares, ER could be scuppered due to the dividend rights.
For example if one shareholder holds 10% non-voting non-cum preference shares and there are 20 other ordinary shareholders, no one gets ER as each ordinary shareholder would be entitled to 90%/20 in dividends. This assumes the preference dividends have to be paid first - I’ve recently seen a set of Articles that say a dividend can be paid on one class but not on others (both ordinary and preference shares are in existence). I’m not sure how you are supposed to sort this one out!
Just some initial thoughts. Please feel free to comment!