Non-cumulative preference shares meaning

Blackrock Holdco 5, LLC v HMRC [2024] EWCA Civ 330 What was the background? In April 2024, the Court of Appeal delivered its decision in the Blackrock appeal. The dispute focused on whether companies could deduct interest under the transfer pricing (TP) rules and the Unallowable Purpose Rule, as set out in sections 441–442 of the Corporation Tax Act 2009. A US-headed group deployed a debt-financed, Delaware-incorporated SPV that was UK tax resident (LLC 5) within the structure for acquiring a US target. LLC 5 took an interest-bearing loan from its US parent (LLC 4) of approximately $4bn to purchase preference shares issued by the acquisition vehicle (LLC 6), which generated non-taxable income. LLC 5 sought to surrender its tax losses, for no consideration, to other UK entities within the BlackRock group as group relief. HMRC contested the interest deductibility under TP, arguing that independent parties acting at arm’s length would not have entered into the loan, and also under the Unallowable Purpose Rule on the basis...

BlackRock Holdco 5 LLC v HMRC [2024] EWCA Civ 330 The taxpayer, LLC5, was incorporated in Delaware but resident in the UK, and was established within the BlackRock group’s structure for its 2009 purchase of the Barclays Global Investor business. LLC5 issued a number of tranches of loan notes to its direct parent, LLC4, and claimed non-trading loan relationship debits for interest paid over several years. It also acquired preference shares in LLC6, which then carried out the acquisition. HMRC denied the debits claimed by LLC5 on two bases: the loans were not on terms comparable to those between independent enterprises (the transfer pricing issue); and securing a tax advantage was a main purpose of LLC5 being party to the loan relationship, with the debits attributable to that purpose (the unallowable purpose issue). The First-tier Tax Tribunal (FTT) upheld the taxpayer’s appeal on both issues...

It is fundamental to ensuring the arrangement meets the company’s specific needs and objectives. This Practice Note aims to assist in pinpointing a company’s stated objectives so as to determine the most fitting share scheme arrangement for it. Types of schemes For the purposes of this note, the following categories of share scheme arrangements will be examined and evaluated against each objective: unapproved share option schemes enterprise management incentives (EMI) schemes company share option plans (CSOPs) share incentive plans (SIPs) save as you earn/sharesave (SAYE) schemes long term incentive plans (LTIPs) growth or value share arrangements joint share ownership plans (JSOPs) phantom share plans Company objectives Set out below are questions to help a company identify the most appropriate share incentive arrangement to meet its aims: Should the scheme be extended to all eligible employees, or offered only on a discretionary basis? Is the arrangement intended for employees alone,...

As set out in Scope of distributions for tax purposes, distributions fall into four categories: dividends — covering paragraph A, with fuller guidance in Tax—types of distribution—dividends transfers of assets or liabilities — covering paragraphs B and G, with further detail in Tax—types of distribution—transfers of assets and liabilities interest recharacterised as a distribution — spanning paragraphs E and F, with more detail in Types of distribution—interest recharacterised as a distribution: non-commercial securities and Types of distribution—interest recharacterised as a distribution: special securities bonus issues of shares or securities — covering paragraphs C, D and H and discussed further in this note Paragraphs C and D—Redeemable share capital and securities The third and fourth categories comprise the company issuing any redeemable share capital or any securities: in respect of shares in, or securities of, the company; and otherwise than for new consideration Distributions within paragraph C or D are often termed ‘CD distributions’,...

Eight anti-avoidance rules block the use of one or more exemption classes for distributions received by companies that are not small. For an outline of the exempt categories, refer to Practice Note: How are non-small companies taxed on distributions received? For the definition of a small company, see Practice Note: What is a small company for the purposes of the distribution exemption? This Practice Note explains four of those anti-avoidance provisions, aimed at distributions which, absent such anti-avoidance rules, would otherwise fall within one or more particular exempt classes as set out in this Practice Note...

subscription and shareholders’ agreement/investment agreement Insert new definitions: A Ordinary Shares; Board; Chair (per clause reference); Investor Consent/Investor Direction (written consent by the Lead Investor or holders of at least [75]% in nominal value of A Ordinary Shares); Investor Director; [Lead Investor]. Add a clause granting Investors the right at any time to appoint and remove non-executive Investor Director[s] and a non-executive Chair by written notice (first appointments effective on Completion), appoint alternates, disapply retirement by rotation, and secure fees of £[amount] p.a. plus VAT and expenses. Establish post‑Completion [remuneration and audit] committee[s] with casting vote rights. articles of association Add definitions for A and B Ordinary Shares, Preference Shares, Investor, Investor Group, Investor Associate, Investor Director, Investor Consent/Direction, Investor Director Interest, Group Company Interest, Co‑Investment Scheme, Confidential Information, FSMA, Fund, Lead Investor, Recognised Investment Exchange, Quotation and Sale. New articles set Board size; permit alternates; regulate meetings, quorum and remote participation; enable authorisation of conflicts and Investor Director/Group Company interests with disclosure and, if directed, A...

Companies Act 2006 — Private Company Limited by Shares — Articles of Association for [ insert name of company ] Limited (Incorporated in England and Wales under registered no. [ insert number ]) (Adopted by special resolution passed on [ insert date ] 20[ insert year ]) 1 Model Articles 1.1 The Model Articles will govern the Company save where these Articles alter, disapply or conflict with them; subject to any such variations, exclusions or inconsistencies, the Model Articles together with these Articles form the Company’s articles of association, to the exclusion of any other articles or regulations contained in any statute, statutory instrument or other subordinate legislation... 1.2 The following provisions of the Model Articles shall not apply to the Company: 11(2) (quorum for directors’ meetings), 12 (chairing of directors’ meetings), 13 (casting vote), 14(1)–(5) (conflicts of interest), 21 (all shares to be fully paid up), 26(5) (share transfers), 30(5)–(7) (procedure for declaring dividends), 39 (chairing general meetings), 42 (voting: general), 44(2) (poll votes), 50 (no...

Add the following new definitions in Article 2.1: Accounts • means, for each financial year of the Company, the audited [ consolidated ] balance sheet together with the profit and loss accounts of the Company and its subsidiary undertakings, prepared on the historical cost basis and in line with generally accepted accounting principles and all applicable accounting standards, Statements of Standard Accounting Practice, Financial Reporting Standards and Statements of Recommended Practice; After Tax Profit • means the amount of the profit [ (including any unrealised profits) ] of the Group for the relevant financial year (as shown by the Accounts): (a) before any provision or reserve has been made for or in respect of: i the payment of any dividend or other distribution on or in respect of any Shares or the transfer of any sum to reserves; ii the redemption of the [ Preferred Shares OR Loan Notes ]; and iii the amortisation or write-off of goodwill arising on consolidation; and (b) after provision has...