Section CW 13 — Income Tax Act 2007: Proceeds from share or option acquired under venture investment agreement

CW 13 Proceeds from share or option acquired under venture investment agreement Exempt income: proceeds from share or option (1) An amount of income that a non-resident derives from the sale or other disposal of a share, or option to buy a share, in a company is exempt income if the requirements of subsections (2) to (5) are met. Requirement relating to company at time of acquisition (2) The first requirement is that, when the non-resident first acquires a share, or option to buy a share, in the company in a way that meets the requirements of subsection (3), the company must have in New Zealand— (a) more than 50% in value of the company’s assets; and (b) more than 50% in number of the company’s employees. Requirement relating to acquisition of first share or option (3) The second requirement is that, when the non-resident first acquires a share or option to buy a share (the first interest ) in the company, a person (the venture capital manager ) must acquire, at the same time and on the same terms,— (a) the first interest, on behalf of the non-resident; and (b) another share or option that confers the same rights and imposes the same obligations as the first interest— (i) on behalf of the Venture Investment Fund or a company owned by the Venture Investment Fund; and (ii) under a venture investment agreement. Continuing requirement relating to company (4) The third requirement is that, while the non-resident holds the share or option, the company must not have 1 or more of the following as a main activity: (a) land development: (b) land ownership: (c) mining: (d) provision of financial services: (e) insurance: (f) construction of public infrastructure assets: (g) acquisition of public infrastructure assets: (h) investing with a main aim of deriving, from the investment, income in the form of interest, dividends, rent, or personal property lease payments that are not royalties. Requirement relating to situation at disposition of share or option (5) The fourth requirement is that, when the non-resident disposes of the share or option,— (a) the venture capital manager must have complied with the venture capital manager’s obligations under the venture investment agreement; and (b) the non-resident must have complied with the non-resident’s obligations under any agreement between the non-resident and the Venture Investment Fund or a company owned by the Venture Investment Fund; and (c) no person who is resident in New Zealand and no group of associated persons who are resident in New Zealand has a direct or indirect interest of more than 10% in the share or option. Venture investment agreement (6) In this section, venture investment agreement means an agreement that— (a) is an agreement, relating to investment in companies, between parties that include— (i) a venture capital manager; and (ii) the Venture Investment Fund or a company owned by the Venture Investment Fund; and (b) provides for investments under the agreement to be managed by the venture capital manager; and (c) provides that an investment under the agreement must be in a company that, when the first investment in the company under the agreement is made, has in New Zealand— (i) more than 50% in value of the company’s assets; and (ii) more than 50% in number of the company’s employees. Defined in this Act: employee , income , interest , non-resident , pay , resident in New Zealand , share , venture investment agreement , Venture Investment Fund , Compare: 2004 No 35 s CW 11C