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SEIS - requirements no longer met?

restructure within 3yr period

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My client mande a SEIS investment in June 18. it was a standalone (A) with associated company (B) i.e. the sort of 'group' that we've all had that isn't actually a group.

In the next month-or-so, there will be a group restructure. A&B will each own 25% of newco D. The remaining 75% will be owned by individuals. A&B will hive their trade down to D. So now my client's investment is in a holdco that owns 25% of a 1-company trading group. Some of the money raised in A's funding round hasn't yet been spent.

 

"It must either exist to carry on a qualifying trade or else be the parent company of a trading group ... A trading group is a group in which, directly or indirectly, more than 50% of the shares of each subsidiary are held by another member of the group, but any subsidiary employing any of the money raised by the issue of shares must be a qualifying 90% subsidiary."

I think that the investment will lose it's SEIS status, unless A spends the rest of the money before the restructure. Am I right?

 

Thanks

 

 

 

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14th Aug 2019 15:51

Anyone ... ?

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14th Aug 2019 16:28

I would tend to agree, though I don't believe there would be any difference if the investment money was spent on the qualifying trade before the restructure.

Per ITA 2007 S257DA, the company the investment is made in must meet the trading qualification for the whole of 'Period B' - which is three years from the issue of shares.

If company A ceases to trade, and the subsidiary is not a qualifying subsidiary (i.e. trading and owned 90+%) then it no longer meets the qualification.

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to Duggimon
14th Aug 2019 16:34

Thanks.

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