INTM700720 - International movements of capital: Exclusions: issue of shares and debentures

FA09/SCH 17/Para 9 and Regulation 5(1)(b) of S.I. 2009 / No. 2192

Regulation 5(1)(b) provides that transactions described in the Schedule to the Regulations and meeting any specified conditions are excluded from the reporting requirement. The provisions in the Schedule largely reflect the exclusions previously embodied in the General Consents given under the repealed legislation at ICTA88/S765 and will therefore already be familiar (see INTM700110). However there are a number of differences between the two sets of rules.

Paragraphs 2 to 6 of the Schedule to S.I. 2009 / No. 2192

Paragraph 2 of the Schedule excludes the issue of shares by the foreign subsidiary to the reporting body or to another company belonging to the same group as the reporting body. The shares must not be redeemable and the issue must be made either at market value and for consideration paid in cash to the foreign subsidiary or made in or towards payment for any business undertaking or property acquired by the foreign subsidiary at market value.

Paragraph 3 of the Schedule excludes the issue of shares by the foreign subsidiary to a person not connected with the reporting body. The issue must be at market value and for consideration paid to the foreign subsidiary and must not be an issue to a nominee or trustee for a person who is connected with the reporting body. There must not be any arrangements by which the reporting body, a person connected with the reporting body, or a nominee or trustee for that person or the reporting body is or may become entitled to the shares or any interest in any of them.

Paragraph 4 of the Schedule excludes the issue of shares by the foreign subsidiary to all its shareholders. The shares must be issued in respect of and in proportion to the shares already held at the time of the issue. The issued shares must not be redeemable or, if no shares are issued to a company resident in the United Kingdom or to a nominee or trustee for such a company, the shares must be issued at market value and for consideration paid in cash to the foreign subsidiary.

Paragraph 5 of the Schedule excludes the issue of debentures by the foreign subsidiary to the reporting body or a company in the same group as the reporting body. There must not be a loan associated with or present in connection with the issue. This applies to any loan which is made by a company not resident in the UK to a company which is resident in the UK. It does not matter whether or not the loan is of the same amount as the amount secured by the debentures.

Paragraph 6 of the Schedule excludes the issue of debentures by the foreign subsidiary to persons who are not connected with the reporting body. The debentures must be issued at market value and for consideration paid to the foreign subsidiary and must not be issued to a nominee or trustee for a person who is connected with the reporting body. There must not be any arrangements by which the reporting body, a person connected with the reporting body, or a nominee or trustee for that person or the reporting body is or may become entitled to the debentures or any interest in them.