What is a Close Company? (07-05-2019)
Source: HM Revenue & Customs | 07-05-2019
A Close Company is broadly defined as a company that is controlled by:
- five or fewer participators or
- any number of participators who are also directors or
- where more than half the assets would be distributed to five or fewer participators, or to participators who are directors, in the event of the winding up of the company.
A participator is broadly somebody who has a share or interest in the capital or income of a company, such as having share capital, voting rights or a right to capital on winding up of the company. This can be a shareholder, director or a loan creditor.
Most small private companies will meet the definition of a Close Company and there are some specific tax rules that apply to these companies, for example, where a close company pays for personal expenses of a director, or makes a loan to one of its participators.