A close call

KEY POINTS

• The growth in the number of close companies.
• Typical ways of funding EBTs.
• Particular issues faced by close companies.
• How to avoid being caught by s 419.

Subject to certain exceptions a UK resident company is a 'close company' if five or fewer participators (or any number of participators if each is a director) either control that company or would be entitled to more than half of the assets available for distribution on its being wound up (ss 414 to 418).

Traditionally close companies have comprised family-run businesses and small private companies.

However with the creation over recent years of many private equity-backed companies (due partly to public-to-private takeovers and management buy-outs) with complex ownership structures the net of companies which are close has widened.

At a time when many companies are...