This section defines " 51 per cent subsidiary ", " 75 per cent subsidiary " and " 90 per cent subsidiary " and provides rules for determining the amount of share capital of one company which is owned by another company when that other does not directly own the share capital of the first company.
SECTION 156.
Question proposed: " That section 156 stand part of the Bill."
I should have the relevant section of the Companies Act here before me, but unfortunately I have not. There is a section in the Companies Act which defines subsidiaries and holding companies. How does this section compare with it, and in what respects does it alter, if at all, the provisions of the Companies Act? Admittedly, the Companies Act does not define 51 per cent, 75 per cent, 90 per cent. If my memory serves me it simply defines a " subsidiary company " and a " holding company " and so forth. Apart from enlargement of that nature, is there any essential difference between the definitions?
I will have to examine the point the Deputy is raising.
If I could have a copy I could deal with the point I am making straightaway.
Section 155 of the Companies Act, 1963 says:
A company shall, subject to sub-section (3), be deemed to be a subsidiary of another if, and only if (a) (i) that other one is a member of it and controls the composition of its board of directors or (ii) holds more than half in nominal value of its equity share of capital or (iii) holds more than half its nominal value of its shares carrying voting rights other than voting rights which arise only in specified circumstances, or (b) the first-mentioned company is a subsidiary of any company which is that other's subsidiary.
That is the general definition of subsidiary. Is there any enlargement of that definition here? The first subsection, on the face of it, simply splits the 1963 definition into three parts for financial purposes, recognising the 1951 and 1975 definitions to the extent of 90 per cent and does not seem to contradict that definition in any way. Is the 1963 definition to remain valid as to what constitutes a subsidiary?
There is no conflict between the 1963 Act and this Act but there is a necessity to spell out the matter in greater detail.
The Minister is dealing with groups of companies.
That is right.
The Minister uses the words, in subsection (5) " shall be deemed to own ".
Subsection (1) of section 155 in the Company's Act says, if and only if, that other is a member of it and controls the composition of its board of directors or holds more than half in nominal value of its equity share capital, or more than half in nominal value of its voting shares, or the first-mentioned company is a subsidiary. What is a member? If we take the present section, section 156, it has been widened considerably by the word " own ". If we compare the wording of section 155 of the Companies Act, 1963, it speaks of " holding ". It does not use the word " own ". In this case, the word " own " is used and it means owned whether directly or through another company or other companies or partly directly and partly through another company or other companies. That is a considerable extension. In so far as this affects tax law it is one thing, but will this definition be an enlargement of the other definition? Is this definition not so worded as to be " for the purpose of this Act and for such purposes only " or some other similar phrase which is often inserted?
That is the only purpose for which it is applicable.
Would the Minister consider limiting that?
There is a difficulty here in so far as they are getting at the beneficial ownership for the tax purposes. The Deputy will see at the beginning of the section " for the purposes of the Corporation Tax Acts. . ." You must relate it to some of the earlier discussions in relation to group relief. It is relevant. The definition is there to get over this, bring these in and tidy up the situation. It is a definition section for the purpose of group relief cases.
It is. It is necessary to look right through many of the links.
I would be satisfied if the Minister can say that the intention is to apply it for taxation purposes only.
I can say that.
Question put and agreed to.