Taxes Consolidation Act 1997 section 494

Eligible shares

Section 494 defines "eligible shares" for the purposes of the employment investment incentive scheme (EIIS).

• Eligible shares are new shares forming part of a company's share capital that comply with the requirements of the section. They may be redeemable, except where relief is claimed under the start-up relief for entrepreneurs (SURE) scheme.
• Shares subscribed for, issued to, held by or disposed of by a nominee on behalf of an individual are treated as subscribed for, issued to, held by or disposed of by that individual, provided the nominee has filed the required Form 21R returns to Revenue.
• Eligible shares may not carry preferential rights to dividends or to repayment of capital on a winding up. However, where shares are issued to the managers of a qualifying investment fund (QIF), they may carry such preferential rights and may be convertible into ordinary shares at the end of the relevant period if not redeemed, provided the conversion terms are reasonable.
• There must be no terms attached to the shares, and no agreements with the investor, that substantially reduce the risk that the investor might not recover their capital or receive any expected dividend. This includes terms in the company's constitution, shareholders' agreements, personal guarantees, or rights over assets of the company or any qualifying subsidiary.