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Eversheds comment: UK public company acquirers to no longer be able to avoid stamp duty

  • United Kingdom

    03-12-2014

    Commenting on measures announced in today's Autumn statement relating to public company takeovers, Stephen Nash, partner at law firm Eversheds, says:

    “One item in the Autumn Statement of particular interest to companies and practitioners involved in public company takeovers is the proposal to “prevent the use of ‘cancellation’ schemes of arrangement for company takeovers” such that acquirers of companies will no longer be able to avoid paying stamp duty. There used to be a time when almost all public company takeovers were conducted by way of a contractual offer on which stamp duty is payable on the shares acquired under the offer. In recent years, it has become increasingly popular for public company takeovers to be structured as schemes of arrangement involving a ‘cancellation’ scheme under which stamp duty is not payable. Over the last few years, nearly 50% of takeovers have been structured this way and, so far this year schemes of arrangement have outnumbered contractual offers by nearly 2:1.

    "The recent abolition of stamp duty on the transfer of AIM quoted securities has already removed this distinction and, therefore, one of the benefits of structuring a takeover as a scheme rather than an offer in relation to AIM quoted targets. As such this distinction, and benefit, is currently primarily relevant to acquirers of companies listed on the main market. It is not clear whether the Chancellor’s proposal is to prevent the use of cancellation schemes on takeovers (forcing companies to use transfer schemes or contractual offers) or to require acquirers to pay stamp duty on a takeover regardless of how it is structured. However, what is clear is that from early next year acquirers of public companies on the main market will no longer be able to avoid stamp duty by structuring their takeover as a scheme.”

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