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Example � A “Particular Person� obtains control

Four shareholders own 25% each of three trading companies. An agreement is reached with a third-party buyer, who wants to acquire 80% of the value of the three companies.

For commercial reasons the third-party buyer insists on purchasing 80% of a group structure rather than 80% of the individual companies.

To enable this, the existing shareholders of the three target companies insert a new holding company (the acquiring company). Following a share for share exchange between the acquiring company and the shareholders of the target companies, the third-party buyer purchases 80% of the issued share capital in the acquiring company.

Assuming all the other conditions for s.77 FA1986 relief are met the “disqualifying arrangements� are not the share exchange itself. The “disqualifying arrangements� (see STSM042460) are the agreement (in existence at the time of the share exchange) for the third-party buyer to purchase 80% of the acquiring company.

In this example there is a “particular person� identified (the third-party buyer) who will, under the arrangements, take control of the acquiring company. Therefore, relief under s.77 FA1986 is not available.

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