Introduction Equity holders Overview Section 161: Meaning of “restricted right to dividends”
640.This section defines restricted right to dividends for use in condition D in section 160(6). It is based on paragraph 1A of Schedule 18 to ICTA.
641.Subsection (1) sets out the condition that dividends should not represent more than a reasonable commercial rate of return. This condition must be met whichever of the other conditions is relied on.
642.Subsection (2) rewrites condition A in paragraph 1A(2) of Schedule 18 to ICTA. It relates to fixed rate shares.
643.Subsection (3) rewrites condition B in paragraph 1A(3) of Schedule 18 to ICTA. It relates to shares that carry a dividend based on a published index (see subsection (5)).
644.Subsection (4) rewrites condition C in paragraph 1A(4) of Schedule 18 to ICTA. It relates to shares that carry a dividend that may be reduced or not paid in special circumstances (see subsection (6)).
645.Subsections (5) to (8) provide interpretative rules for the section, including a Treasury power in relation to “special circumstances” for the purpose of subsection (4).