What is an associated company?
A company is another’s “associated company” at a particular time if, at that time or at any other time within the preceding 12 months—(a) one of them has control of the other, or
(b) both are under the control of the same person or persons.
In other words, two companies are associated when the same person or group of persons can control both, either personally, or via their interests in other corporate shareholders.
The main tests for control are by:
- % share ownership
- Voting power
- Any rights conferred in the Memorandum and Articles, or other rights.
- Entitlement to assets on winding up (loan creditors).
It is possible for a number of persons to be in control if you apply different tests. This can give unexpected results.
For an overview, planning points and examples see the following guides:
Close companies: definitions & control
Close companies: associated company tests
HM Treasury launched consultation to reform the rules in October 2009. It was announced in Budget 2010 that changes will be made in Finance Act 2011.
