Rely on the most comprehensive, up-to-date legal content designed and curated by lawyers for lawyers
Work faster and smarter to improve your drafting productivity without increasing risk
Accelerate the creation and use of high quality and trusted legal documents and forms
Streamline how you manage your legal business with proven tools and processes
Manage risk and compliance in your organisation to reduce your risk profile
Stay up to date and informed with insights from our trusted experts, news and information sources
Access the best content in the industry, effortlessly — confident that your news is trustworthy and up to date.
With over 30 practice areas, we have all bases covered. Find out how we can help
Our trusted tax intelligence solutions, highly-regarded exam training and education materials help guide and tutor Tax professionals
Regulatory, business information and analytics solutions that help professionals make better decisions
A leading provider of software platforms for professional services firms
In-depth analysis, commentary and practical information to help you protect your business
LexisNexis Blogs shed light on topics affecting the legal profession and the issues you're facing
Legal professionals trust us to help navigate change. Find out how we help ensure they exceed expectations
Lex Chat is a LexisNexis current affairs podcast sharing insights on topics for the legal profession
Printer Friendly Version
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.
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)
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 public takeover. Since stamp duty and SDRT do not apply to a capital reduction or an issue of shares, a takeover by way of a cancellation scheme of arrangement resulted in a stamp tax saving. By prohibiting takeovers by way of cancellation schemes, the target company’s shares must instead be transferred, which means that SDRT or stamp duty will apply to the transfer.
The Regulations do not prohibit the use of a capital reduction in relation to an intra-group reorganisation (ie a transaction to insert a new holding company into a group structure where the shareholders of the new holding company, and their holdings, have not changed substantially from the shareholders of the target company).
It will still be possible to use a transfer scheme of arrangement to effect a public takeover.
Regulation 2 includes transitional provisions so that the prohibition does not affect any cancellation scheme of arrangement giving effect to a takeover where:
in either case, before 4 March 2015, when the Regulations came into force.
An Explanatory Memorandum is available alongside the statutory instrument. For further details on the prohibition, see our News Analyses: Government stamps its intentions on schemes of arrangement and UK takeovers-the demise of the scheme of arrangement?
Kavita Bassan, solicitor in the Lexis®PSL Corporate team.
0330 161 1234