Use of cancellation schemes in takeovers prohibited

Use of cancellation schemes in takeovers prohibited

Corporate analysis: Following the Chancellor's announcement in the Autumn Statement 2014 to close a stamp tax 'loophole' by introducing measures to prevent the use of cancellation schemes to effect takeovers, Parliament has adopted the Companies Act 2006 (Amendment of Part 17) Regulations 2015, which came into force on 4 March 2015.

Original news

The Companies Act 2006 (Amendment of Part 17) Regulations 2015, LNB News 13/01/2015 133

SI 2015/472: Companies are prohibited from reducing their share capital by using a scheme of arrangement in connection with the takeover of that company. This is intended to prevent takeovers avoiding stamp duty and stamp duty reserve tax (SDRT). (Updated from draft on 4 March 2015)

What do the Regulations prohibit, and are there any exceptions?

The Regulations amend the Companies Act 2006, s 641 (CA 2006) (circumstances in which a company may reduce its share capital) by adding a new subsection (CA 2006, s 641(2A)) which prohibits a target company from using a capital reduction scheme of arrangement (also referred to as a cancellation scheme) in order to facilitate a publ

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About the author:
Jenisa is Head of Market Tracker, a transaction analysis product that sits within Lexis®PSL Corporate. She has over 13 years of legal publishing experience, with a focus on researching and reporting on trends and developments in the corporate and commercial legal market. Previous roles include content developer for Lexis®PSL, Legal Podcaster at Informa, and Research Editor at Practical Law Company where she specialised in reporting on cross-border corporate and commercial developments from the firm’s New York office.