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Does a company have a 'controlling individual' under subsection 152-55(1) of the Income Tax Assessment Act 1997 (ITAA 1997) if it has different classes of shares held by different shareholders and the directors can make distributions to any class of shares to the exclusion of the other classes of shares?

No. A company does not have a 'controlling individual' under subsection 152-55(1) of the ITAA 1997 if it has different classes of shares held by different shareholders and the directors can make distributions to any class of shares to the exclusion of the other classes of shares.

A company has two different classes of shares. Each class of shares is held by different shareholders. The directors can decide to make a distribution of income or capital to either class of shares to the exclusion of the other class of shares. There is the possibility of at least one shareholder receiving 50% of a distribution from the company depending on the exercise of the directors' discretion.

Under subsection 152-55(1) of the ITAA 1997 an individual is a 'controlling individual' of a company if they hold the legal and equitable interests in shares (other than redeemable shares) that carry between them the right to exercise at least 50% of the voting power in the company and the right to receive at least 50% of any distribution of income and capital that the company may make.

Therefore a company can have a 'controlling individual' only if it has an individual shareholder who holds shares that carry between them the right to receive at least 50% of any distribution the company may make.

If a company has different classes of shares held by different shareholders and can make a distribution to any class of shares to the exclusion of the other classes of shares, there is no specific shareholder who holds shares that carry between them the right to receive any amount of distribution the company may make. Any particular shareholder may receive a distribution or they may not receive anything at all. Therefore the company does not have a 'controlling individual' under subsection 152-55(1) of the ITAA 1997.