600H. Qualifying investor

(1) For the purposes of this Chapter, a ‘qualifying investor’ is an individual who on his or her own behalf subscribes for eligible shares in a qualifying company and complies with this section.

(2) (a) An individual shall not be a qualifying investor if at the date of investment the individual is connected, as determined in accordance with this section and section 600I, with the company.

(b) In this Chapter, an individual shall be connected with a company if the individual or an associate of the individual—

(i) is a partner of the company, or of any company that is a member of the relief group of which that company is a member,

(ii) is a director or employee of the company, or of any company that is a member of the relief group of which that company is a member, or

(iii) subject to subsection (3), has an interest in the capital of the company, or of any company that is a member of the relief group of which that company is a member.

(3) (a) Subject to subsection (4), for the purposes of this section, an individual shall have an interest in the capital of a company that is a member of the relief group if that individual, or that individual’s associate, directly or indirectly possesses or is entitled to acquire—

(i) any of the issued share capital,

(ii) any of the loan capital,

(iii) any of the voting power, or

(iv) rights to the assets on a winding up,

of any such company.

(b) For the purposes of paragraph (a)(ii), the loan capital of a company shall be treated as including any debt incurred by the company—

(i) for any money borrowed or capital assets acquired by the company,

(ii) for any right to receive income created in favour of the company, or

(iii) for consideration the value of which to the company was, at the time when the debt was incurred, substantially less than the amount of the debt (including any premium on the debt),

but shall not include a debt incurred by the company by overdrawing an account with a person carrying on a business of banking if the debt arose in the ordinary course of that business.

(c) (i) For the purposes of paragraph (a)(iv), an individual shall have a right to the assets on a winding up if that individual, or an associate of the individual, has rights as would, in the event of the winding up of a company or in other circumstances, entitle the individual to receive any assets of the company which would at that time be available for distribution to equity holders of the company, and for the purposes of this subsection—

(I) the persons who are equity holders of the company, and

(II) the percentage of the assets of the company to which the individual would be entitled,

shall be determined in accordance with sections 413 and 415, with references in section 415 to the first company being construed as references to an equity holder and references to a winding up being construed as including references to any other circumstances in which assets of the company are available for distribution to its equity holders.

(ii) In applying sections 413 and 415 in determining the percentage of share capital or other amount which a shareholder beneficially owns or is beneficially entitled to under subparagraph (i), no regard shall be had to the provisions of section 411(1)(c).

(d) (i) For the purposes of this section, an individual shall have an interest in the capital of the company if the individual has control of it.

(ii) For the purposes of this section, an individual shall be treated as having an interest in the capital of the company if the individual has, at the date of investment, control of another company which is a subsidiary of the company.

(4) For the purposes of subsection (3), no account shall be taken of shares in a company which are held by the individual concerned, or an associate of that individual, where—

(a) that individual or that associate, as the case may be, may be entitled to relief under section 600M on the disposal of those shares, and

(b) that individual, or a person connected with that individual, did not, at the date of investment, control the company concerned.

(5) For the purposes of this section an individual shall be treated as entitled to acquire anything which the individual is entitled to acquire at a future date or will at a future date be entitled to acquire, and there shall be attributed to any person any rights or powers of any other person who is an associate of that person.

(6) For the purposes of subsection (2), an individual shall not be connected with a company by reason that an associate of the individual—

(a) has an interest in the share capital of that company, and

(b) is a partner of the individual solely by virtue of their both being partners in a qualifying investment fund within the meaning of section 508IA or a qualifying partnership.