CW 13Proceeds from share or option acquired under venture investment agreement

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.

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—

3. more than 50% in value of the company’s assets; and
4. more than 50% in number of the company’s employees.

5. 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,—

6. the first interest, on behalf of the non-resident; and
7. another share or option that confers the same rights and imposes the same obligations as the first interest—
   1. on behalf of New Zealand Growth Capital Partners Limited or a company owned by New Zealand Growth Capital Partners Limited; and
   2. under a venture investment agreement.

8. 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:

9. land development:
10. land ownership:
11. mining:
12. provision of financial services:
13. insurance:
14. construction of public infrastructure assets:
15. acquisition of public infrastructure assets:
16. 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.

17. The fourth requirement is that, when the non-resident disposes of the share or option,—

18. the venture capital manager must have complied with the venture capital manager’s obligations under the venture investment agreement; and
19. the non-resident must have complied with the non-resident’s obligations under any agreement between the non-resident and New Zealand Growth Capital Partners Limited or a company owned by New Zealand Growth Capital Partners Limited; and
20. 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.

21. In this section, venture investment agreement means an agreement that—

22. is an agreement, relating to investment in companies, between parties that include—
    1. a venture capital manager; and
    2. New Zealand Growth Capital Partners Limited or a company owned by New Zealand Growth Capital Partners Limited; and
23. provides for investments under the agreement to be managed by the venture capital manager; and
24. 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—
    1. more than 50% in value of the company’s assets; and
    2. more than 50% in number of the company’s employees.