This second test for determining whether a company is close looks at the rights of individuals on a notional winding-up. Provided it is not within one of the exemptions described in D3.113, a company (the relevant company) will be close if five or fewer participators, or participators who are directors, together possess or are entitled to acquire such rights as would on a notional winding up of a company entitle them to receive the greater part of the assets of that company available for distribution among the participators. Control is irrelevant here as the test is based on rights in a winding-up.
This test is applied first on the basis that loan creditors are included as participators and then on the basis that they are disregarded. The company is close if it satisfies the test on either basis1.
As with other
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