Summary
Small or insignificant preferential rights attaching to shares could not be ignored for enterprise investment scheme (EIS) purposes, such that EIS relief was not due, and relief claimed and already allowed was withdrawn.
Background
The appellant company’s share capital was divided into two classes (A and B shares), which had identical economic rights; and each carried one vote at a general meeting of the company.
The appellant needed to raise further funds from its shareholders. However, if the appellant’s capital structure remained unchanged, and holders of B shares simply subscribed for further B shares, more than half of the amount that holders of B shares subscribed would benefit the holders of the A shares (since the A shares ranked side by side with B shares in economic terms). The holders of the B shares were not prepared to make a further
