110289 Topic 10: Companies pt 1

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110289 Topic 10: Companies pt 1
2015-10-30 08:54:35
110289 T10

companies pt 1
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  1. Companies - General:
    • Includes “any body corporate” (sec YA 1); or
    • Any other entity with a legal personality or existence;
    • It is distinct from its members;
    • Could be created or incorporated in NZ or elsewhere;
    • Includes a unit trust, building societies, and public or local authorities
  2. Companies - Categories
    • Widely-held: has 25 or more shareholders (associated persons counted as one) - previously known as public companies;
    • Close: 5 or fewer natural persons whose voting /market value interests are greater than 50% – excludes special corporate entity and previously known as a private/proprietary companies;
    • Closely-held: 5 or fewer persons – direct voting / market value interests greater than 50%;
    • Look Through Companies – a new regime introduced on 1 April 2011, replacing QC regime, treated in a similar way to partnerships
  3. Companies - Residency:
    A company will be resident in New Zealand for tax purposes, if (s YD 2 (1)):
  4. Incorporated in New Zealand, or
    • Head Office in New Zealand, or
    • Centre of Management in New Zealand, or
    • Control of company by its directors is exercised in New Zealand
  5. Companies - Company Losses:
    A company can carry forward a loss made in one year to be offset against profits in a future year, subject to shareholder continuity test;

    Grouping of losses against profits by members within the group, subject to the commonality of shareholding rules;

    Wholly owned companies – treated as one company.
  6. Company Losses - Carry Forward of Losses [Sec IA 2(2)]
    Sec IA 2(2): where a company makes a loss (instead of a profit) such a loss can be offset against profit derived in a later year, on condition the continuity requirements of Sec IA 5 are met.

    The continuity of shareholding rules are designed to ensure that the shareholders/ owners of the company at the time the losses are incurred are essentially the same “owners” as those who would benefit from the offsetting of this loss against future profits.
  7. Company Losses - Carry forward of Losses [Sec IA 5]:
    Sec IA 5: requires that at all times during the period, from the beginning of the year of loss to the end of the loss offset income year, there must be a 49% continuity of ownership in the loss company.

    The 49% is the minimum proportion of voting interests to be held directly or indirectly and, is the aggregate of the lowest level of voting interests held by each shareholder throughout the period.

    Trace through to ultimate human shareholders

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