Finance Act 1989

Securities

7 (1) Subject to paragraph 8 below, the trust deed must provide that securities acquired by the trustees must be shares in the founding company which—

(a) form part of the ordinary share capital of the company,

(b) are fully paid up,

(c) are not redeemable, and

(d) are not subject to any restrictions other than restrictions which attach to all shares of the same class or a restriction authorised by sub-paragraph (2) below.

(2) Subject to sub-paragraph (3) below, a restriction is authorised by this sub-paragraph if—

(a) it is imposed by the founding company’s articles of association,

(b) it requires all shares held by directors or employees of the founding company, or of any other company which it controls for the time being, to be disposed of on ceasing to be so held, and

(c) it requires all shares acquired, in pursuance of rights or interests obtained by such directors or employees, by persons who are not (or have ceased to be) such directors or employees to be disposed of when they are acquired.

(3) A restriction is not authorised by sub-paragraph (2) above unless—

(a) any disposal required by the restriction will be by way of sale for a consideration in money on terms specified in the articles of association, and

(b) the articles also contain general provisions by virtue of which any person disposing of shares of the same class (whether or not held or acquired as mentioned in sub-paragraph (2) above) may be required to sell them on terms which are the same as those mentioned in paragraph (a) above.

(4) The trust deed must provide that shares in the founding company may not be acquired by the trustees at a price exceeding the price they might reasonably be expected to fetch on a sale in the open market.

(5) The trust deed must provide that shares in the founding company may not be acquired by the trustees at a time when that company is controlled by another company.

8 The trust deed may provide that the trustees may acquire securities other than shares in the founding company—

(a) if they are securities issued to the trustees in exchange in circumstances mentioned in section 85(1) of the [1979 c. 14.] Capital Gains Tax Act 1979, or

(b) if they are securities acquired by the trustees as a result of a reorganisation, and the original shares the securities represent are shares in the founding company (construing “reorganisation” and “original shares” in accordance with section 77 of that Act).

9 (1) The trust deed must provide that—

(a) where the trustees transfer securities to a beneficiary, they must do so on qualifying terms;

(b) the trustees must transfer securities before the expiry of the period of seven years beginning with the date on which they acquired them.

(2) For the purposes of sub-paragraph (1) above a transfer of securities is made on qualifying terms if—

(a) all the securities transferred at the same time are transferred on similar terms,

(b) securities have been offered to all the persons who are beneficiaries under the terms of the trust deed when the transfer is made, and

(c) securities are transferred to all such beneficiaries who have accepted.

(3) For the purposes of sub-paragraph (2) above, the fact that terms vary according to the levels of remuneration of beneficiaries, the length of their service, or similar factors, shall not be regarded as meaning that the terms are not similar.

(4) The trust deed must provide that, in ascertaining for the purposes of a relevant rule whether particular securities are transferred, securities acquired earlier by the trustees shall be treated as transferred by them before securities acquired by them later; and a relevant rule is one which is included in the trust deed and conforms with sub-paragraph (1) above.