Section 724A Disregard of change in parent companyF1C1
United Kingdom
Where a new company (“N”) acquires all the issued share capital of another company (“C”), the resulting ownership change is disregarded for the purposes of Chapters 2 to 6 if, immediately after that acquisition (“the acquisition”), N—
possesses all of the voting power in C,
is beneficially entitled to 100% of any profits available for distribution to equity holders of C,
would be beneficially entitled to 100% of any assets of C available for distribution to its equity holders in the event of a winding up of C or in any other circumstances, and
meets the continuity requirements.
“The resulting ownership change” means the change in the ownership of C by reason of Condition A in section 719 being met in relation to the acquisition.
A company is “new” if, before the acquisition, it has neither—
issued any shares other than subscriber shares, nor
begun to carry on any trade or business.
N meets the continuity requirements if, and only if—
the consideration for the acquisition consists only of the issue of shares in N to the shareholders of C,
immediately after the acquisition, each person who immediately before the acquisition was a shareholder of C is a shareholder of N,
immediately after the acquisition, the shares in N are of the same classes as were the shares in C immediately before the acquisition,
immediately after the acquisition, the number of shares of any particular class in N bears to all the shares in N the same proportion, or as nearly as may be the same proportion, as the number of shares of that class in C bore to all the shares in C immediately before the acquisition, and
immediately after the acquisition, the proportion of shares of any particular class in N held by any particular shareholder is the same, or as nearly as may be the same, as the proportion of shares of that class in C held by that shareholder immediately before the acquisition.
For the purposes of this section, N is treated as acquiring all the issued share capital of C for consideration consisting only of the issue of shares in N to the shareholders of C if, as a result of a scheme of reconstruction involving the cancellation of all shares in C and the issue of shares in N—
N holds all the issued share capital of C by reason of that share capital being issued to N by C, and
only shares in N are issued to the persons who were shareholders of C immediately before the shares in C were cancelled.
In a case within subsection (5), subsection (4) applies as if any reference to immediately before the acquisition were a reference to immediately before the shares in C were cancelled.
“Scheme of reconstruction” means a scheme carried out in pursuance of a compromise or arrangement—
to which Part 26 F2or 26A of the Companies Act 2006 (arrangements and reconstructions) applies, or
under any corresponding provision of the law of a country or territory outside the United Kingdom.
Chapter 6 of Part 5 (equity holders and profits or assets available for distribution) applies for the purposes of subsection (1)(b) and (c) as it applies for the purposes of section 151(4).
Annotations
Textual amendments
- F1
S. 724A inserted (with effect in accordance with s. 37(6) of the amending Act) by Finance Act 2014 (c. 26), s. 37(4)
- F2
Words in s. 724A(7)(a) inserted (26.6.2020) by Corporate Insolvency and Governance Act 2020 (c. 12), s. 49(1), Sch. 9 para. 44 (with ss. 2(2), 5(2))
Modifications
- C1
Ss. 719-724A modified (with effect in relation to accounting periods commencing on or after 31.12.2023) by Finance (No. 2) Act 2023 (c. 30), ss. 212(5), 264
Notes on Part 14
Modifications
- C1
Pt. 14 applied (1.4.2022 in relation to accounting periods beginning on or after that date) by Finance Act 2022 (c. 3), s. 51(1), Sch. 7 para. 20
- C2
Pt. 14 applied (with modifications) (14.7.2022) by Energy (Oil and Gas) Profits Levy Act 2022 (c. 40), Sch. 1 para. 18 (with ss. 15(1), 16(1), 17)