STSM042485 - Exemptions and reliefs: reliefs: Section 77A – Example Transaction B (“Particular Persons”)
Example – “Particular Persons Together”
Cinque Co carries on a delivery business and a grocery business. It has five existing shareholders, who each hold 20% of the issued share capital. No shareholder, or combination of shareholders acting together have control of Cinque Co
The shareholders decide that it would be best to have separate entities that focus on each business activity – three shareholders (Herbert, Humphrey and Howard) decide to stay with the delivery business and the other two shareholders (Bertha and Bella) decide to focus on the grocery business.
Following a share for share exchange, Topco acquires Cinque Co and all five shareholders hold 20% of the issued shares in the acquiring company.
The delivery business is transferred (or distributed) from Cinque Co to Topco. A demerger (see STSM042520) is then carried out, under which the shares in Cinque Co are transferred from Topco to a company owned by Bertha and Bella, and the shares that they hold in Topco are cancelled.
As a result of the demerger Herbert, Humphrey and Howard each hold 33.3% of the issued shares in Topco. No single shareholder, or combination of shareholders acting together have control of Topco (i.e. Herbert and Humphrey aren’t acting together to control Topco, for example). Therefore, there are no arrangements in place for a person or persons to obtain control of the acquiring company (Topco), so s.77A FA1986 will not act to block relief.