Throughout period B (see E3.104), the issuing company must meet the trading requirement in order to be a qualifying company for the purposes of EIS1.
EIS is intended to encourage investment in new enterprises, and so the purpose of this requirement is to encourage the raising of funds for trading activities and not for the purpose of long term investment. A new company whose directors are actively engaged in setting up a trade may meet the trading requirement even if it is not yet trading and a large part of its funds is temporarily being held on deposit. However, the making of investments which are not easily realisable is likely to lead to the conclusion that the company exists for investment purposes. An intention to trade at a later date may be insufficient to meet the trading requirement2.
The trading requirement is that either the issuing company3:
- Ìý
•ÌýÌýÌýÌý ignoring any incidental purposes, exists wholly for the purpose of carrying on one or more qualifying trades (see E3.1424), or
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