BLM80320 - Sale of lessor companies and similar arrangements: establishing change of ownership: consortia: identifying the principal company

FA06/Sch10/Para12

This guidance applies to transactions where the relevant day falls before 9 December 2009.

A company carrying on a leasing business could be owned by a consortium.

The concept of a ‘company owned by a consortium’ is the same for these purposes as it is in section 402 ICTA 1988 (FA06/SCH10/PARA14). So a company is treated as owned by a consortium when it is:

  • not a 75% subsidiary of any company; and
  • 75% or more of its ordinary share capital is beneficially owned by two or more companies (a consortium); and
  • none of those other companies owns less than 5% of that capital.

A holding company owned by a consortium and its 90% trading subsidiaries are also so treated, provided they are not a 75% subsidiary of any other company.

In a consortium situation a test to establish a 75% subsidiary relationship is not appropriate; no member of a consortium can hold 75% of the shares in a consortium company and so no company would be a principal company.

Where a consortium company is carrying on a leasing business the consortium member is the principal company unless the consortium member is a 75% subsidiary of another company in which case that other company is the principal company (unless it is a 75% subsidiary of another company, in which case that other company is the principal company, and so on).

Where a consortium is involved the lessor company will have more than one principal company:

These principles are illustrated in the following examples.

Use this link to view example 1

In this example A Ltd is the lessor company and E Ltd and Z Ltd are principal companies of A Ltd.

Example 2

Where the consortium member is a member of a group the principal company will be the top company in a chain of 75% subsidiaries starting from the consortium member.

Use this link to view example 2

In this example A Ltd is the lessor company and E Ltd and Z Ltd are members of the consortium.

  • E Ltd is a 75% subsidiary of B Ltd and so cannot be a principal company.
  • B Ltd is a 75% subsidiary of C Ltd and so cannot be a principal company.
  • C Ltd is not a 75% subsidiary of any other company and must therefore be a principal company.
  • Z Ltd is a 75% subsidiary of Y Ltd and so cannot be a principal company.
  • Y Ltd is not a 75% subsidiary of any other company and must therefore be a principal company.

The principal companies of A Ltd are C Ltd and Y Ltd.

Example 3

The test also accommodates situations where Company A is a 90% subsidiary of a holding company owned by the consortium. In this situation the test looks through to the consortium member.

Use this link to view example 3

In this example A Ltd is the lessor company. It is a 100% subsidiary of D Ltd. D Ltd is a holding company owned by a consortium. In these circumstances E Ltd and F Ltd are principal companies of A Ltd unless E Ltd and F Ltd are 75% subsidiaries of another company.