D1.1021 Substantial shareholdings—Effect of liquidation of investing company
If the investing company, or a member of the same group, is placed in liquidation, it is not treated, for the purpose of determining whether a substantial shareholding exists, as losing beneficial ownership of its assets. This means that the shares in the target company are still regarded as held by the investing company (or member of its group) and any acts of the liquidator are regarded as acts of the relevant company1.
When a company goes into liquidation the general rule is that the company ceases to be the beneficial owner of its assets2. Where, during liquidation, the company's assets vest in the liquidator (under Insolvency Act 1986, s 145 or Article 123 of the Insolvency (Northern Ireland) Order 1989 or otherwise), this rule is specifically disapplied for the purposes of the substantial shareholding exemption (SSE) by TCGA 1992, Sch 7AC, para 16 in respect of the investing company or a member of the same group. In the absence of this specific provision, a company in liquidation whose assets are vested in a liquidator under the Insolvency Act 1986, s 145 or the Insolvency (Northern Ireland) Order, SI 1989/2405, art 123, might not strictly meet the ownership conditions of the substantial shareholding test.
HMRC's guidance3 makes it explicit that, in their view, for the purposes of SSE, a company retains beneficial ownership of its assets during a liquidation (without noting any limitation on the type of liquidation involved), stating: