What is asset stripping? Asset stripping is the controversial practice involving the purchase of a company and the deliberate depletion of that company’s assets for personal gain or to increase short-term profits. A subset of asset stripping is ‘phoenixing’, a practice which involves the directors of a company liquidating or abandoning a company in order to avoid its liabilities to creditors and then continuing the same business via a new or related company. Phoenixing The creation of a phoenix company is a species of asset stripping. A phoenix company is formed when an insolvent company’s business is transferred to a new company, leaving behind the debts and liabilities with the insolvent company. Phoenix companies typically operate in the same business as the previous (now insolvent) company, have the same or largely the same directors as the previous company and in some cases have a similar name to their predecessor. Re-use of the company name Under section 216 of the Insolvency Act 1986 (IA 1986), phoenix companies are prohibited from re-using the predecessor company’s

The ratio of annual sales divided by net assets employed in the business. Asset turnover measures a company’s efficiency at using its assets to generate sales or revenue. The higher the number the better.

For the purposes of Rule 29 (asset valuations), the Royal Institution of Chartered Surveyors Valuation Standards or the International Valuation Standards Council.

Background Sometimes a party to a takeover transaction may wish to publish an asset valuation during an offer period or a party may have a valuation on record. The City Code on Takeovers and Mergers (Code) recognises that shareholders may rely on these valuation figures in deciding whether to accept or reject an offer and Rule 29 of the Code regulates how such asset valuations are treated during the course of a takeover transaction. Following its October 2018 consultation, the Takeover Panel (Panel) published a revised version of the Code on 1 April 2019 which included changes to Rule 29. The changes were intended to more accurately reflect the Panel’s practice and provide a more logical framework for the asset valuation regime. The 2019 amendments continue to form the basis of the current Rule 29 regime, and the framework described below reflects the Panel’s current practice. For further details on the changes, see News Analysis: Takeover Panel seeks to provide clarity on treatment of asset valuations . Valuations to which Rule 29 applies Rule 29

An arrangement in which a pool or portfolio of assets is put together in a ‘special purpose vehicle’ (SPV) and then financed through short-term borrowing in money markets.

What does this Practice Note cover? This Practice Note describes the key features of asset-backed commercial paper (ABCP), conduits, and structured investment vehicles (SIVs). It also outlines key legal and regulatory considerations relevant to their structure and use. What is asset-backed commercial paper? Commercial paper (CP) is a short-term debt instrument typically issued by corporations or financial institutions to meet short-term funding needs. It is usually unsecured and issued by entities with high credit ratings. For more information about commercial paper, see Practice Note: Commercial paper and euro-commercial paper. ABCP is a form of CP that is secured by underlying assets, usually receivables that produce regular cashflows. Issuers of ABCP do not need to have high credit ratings themselves. Investors focus on the quality and cash flow of the underlying assets, rather than the creditworthiness of the issuer. A variety of asset types can be used for ABCP, for example: • credit card receivables • residential and commercial mortgages • commercial loans (eg auto loans and leases) • trade receivables As with CP, ABCP

A system under which the sponsoring employer of a pension scheme uses its income-producing business assets (eg property) to generate a revenue stream payable to its pension scheme, as a way of dealing with any deficit in the scheme.

THIS PRACTICE NOTE APPLIES ONLY TO DEFINED BENEFIT OCCUPATIONAL PENSION SCHEMES Asset-backed contribution arrangements are a tool, which can be used to help reduce pension scheme deficits. There are risks involved, although these can be mitigated through seeking appropriate professional advice and structuring the arrangement correctly. However, the ultimate question, which will need to be carefully considered by the scheme trustee and its advisers, is whether investing in an asset-backed contribution arrangement puts the trustee and the scheme in a better position than simply signing up to a long recovery plan. Since Marks & Spencer led the way in 2008 with a property-backed contribution arrangement designed to reduce the deficit carried by its pension scheme by £500m, a number of other major names have followed suit, including John Lewis, Sainsbury’s and Whitbread. Today, employers use asset-backed contributions as an efficient way to fund growing deficits in defined benefit occupational pension schemes. What is an asset-backed contribution arrangement? An asset-backed contribution (ABC) arrangement is a contractual funding arrangement by which a special purpose vehicle

The funding of defined benefit pension schemes and the volatility and risk associated with these schemes has been a key issue for many employers over many years. Asset-backed contribution (ABC) arrangements can be used to reduce pension scheme deficits as an alternative to cash payments under a standard schedule of contributions. However, ABC arrangements are not without complexity, and tax is a key consideration both to ensure the desired tax outcome is achieved and to mitigate the risk of any undesirable tax consequences arising. This Practice Note provides a brief overview of ABCs and then looks at the key tax considerations relevant to an ABC structure, including their restructuring and unwinding, which is principally addressed in sections 196–196L of the Finance Act 2004 (FA 2004). For further information on what ABCs are, how they can be used to reduce pension scheme deficits and the main considerations when setting up such an arrangement, see Practice Note: Asset-backed contributions for pension schemes. ABCs—an overview ABC structures were initially developed to enable companies to address pension scheme

This Practice Note outlines what is normally covered in a UK tax opinion given by the tax lawyers acting for a UK tax resident securitisation company involved in an asset-backed securitisation (also known as an ABS or true sale securitisation). An ABS is, in its basic form, a transaction whereby a company (originator) monetises (sells) its assets to an orphan special purpose vehicle (SPV) in order to raise cash. The SPV funds the acquisition of the assets by issuing listed notes to the market. The assets underlying the securitisation are known as securitised assets. A special corporation tax regime applies to companies that: • qualify as securitisation companies, and • satisfy two additional conditions: ◦ the unallowable purposes test, and ◦ the payments condition This tax regime is set out in the Taxation of Securitisation Companies Regulations 2006 (Securitisation Tax Regs), SI 2006/3296 and is referred to in the HMRC Manuals as the permanent securitisation regime. For more information on this tax regime, see Practice Note: Asset-backed securitisations—the UK tax treatment. In

This Practice Note considers the UK taxation treatment of securitisation companies that fall within the scope of the securitisation regime provided by the Taxation of Securitisation Company Regulations 2006, SI 2006/3296 (the Securitisation Tax Regs), which the HMRC Manuals refer to as the permanent securitisation regime. This Practice Note explains: • what a securitisation is • that there are five types of securitisation company • the additional conditions that must be satisfied by any type of securitisation company in order for it to be taxed under the securitisation regime, namely: ◦ the unallowable purposes test, and ◦ the payments condition • the UK corporation tax treatment that applies to securitisation companies that satisfy all the conditions to be taxed under the securitisation regime • the consequences for a company of failing to fall within the securitisation regime • the limited recourse nature of the notes issued in a securitisation • the interaction with the corporate interest restriction legislation, the hybrid and other mismatches rules, Pillar Two and, for accounting periods beginning before 1 January

Securities backed by the income stream of income-producing financial assets.