IFM40455 - Ceasing to be a QAHC: timing of departure when a QAHC is sold

PARA 30 contains a special rule potentially delaying the date on which a QAHC will be deemed to leave the regime when it is sold.

This rule is necessary since it is possible in any sale process that beneficial ownership of the shares being sold may be lost by the seller prior to completion. Where the sale process involves split exchange and completion, it is almost certain that beneficial ownership will be lost early in this way. However, it is intended that (in the absence of avoidance) QAHCs which are the subject of sale processes should be allowed to retain their status until completion of those processes.

PARA 30 enables the QAHC to retain its qualifying status until completion as long as the anti-avoidance provision in PARA 30(3) is not triggered. This provision will apply if the parties enter into arrangements which are abnormal, contrived or lack genuine commercial purpose in order to take advantage of the deferral of the point of departure from the regime provided for by PARA 30.

Because the rule in PARA 30 operates by reference to transfers of relevant interests in QAHCs and not shares in QAHCs, it will operate in relation to all QAHCs in a stack where the commercial transaction is a sale of the top QAHC in the stack (since it will be the transfer of shares in the top company that gives rise to transfers of relevant interests in its subsidiary QAHCs).

The provision identifies the point of completion as the earlier of when the obligations of the parties to the transfer which are necessary to effect the transfer have been met, or when any of the substantive consideration for the transfer has been paid. Typically, it will be the latter limb which will be in point, as most contracts for the sale of shares will require payment before the execution of stock transfer forms and registration of share transfers. PARA 30(2) excludes non-refundable deposits from being substantive consideration.