CTM80600 - Consortia: group relief: arrangements

ICTA88/S410 (2) to (6)

Even though a company may otherwise satisfy the conditions for:

• surrender of relief to, or
• claim to relief from,

the members of a consortium, the conditions are deemed not to be satisfied for the accounting period of claim if certain 'arrangements' are in existence at a time material to the claim. 'Arrangements' for this purpose are specified in ICTA88/S410 (2) to (6) and are described in CTM80605 onwards. See CTM80635 about getting information about arrangements.

In general, the type of arrangements which ICTA88/S410 (2) to (6) aims at are those which would permit the company held by a consortium to switch to a group situation. However ICTA88/S410 applies in every case where arrangements exist.

The term 'arrangements' means arrangements of any kind whether in writing or not. Therefore the legislation covers both arrangements which are:

• binding on the parties,

and

• less formal in character and not necessarily binding.

Arrangements may be a matter of specific agreement or inherent in the capital structure of a company. Examples of inherent arrangements are where:

• the majority of the voting rights in a company is held other than by the purported parent, or
• such majority control, though not at present so held, can be acquired through the exercise of conversion rights attaching to the company's loan or debenture stock.

The definition of 'control' for the purposes of ICTA88/S410 (2) to (6) is in ICTA88/S840. This Section does not merely define 'control' in terms of direct shareholdings and voting rights in the company concerned. If they affect the 'control' situation:

• the shareholdings and voting rights in any company,

and also

• the powers conferred by the documents regulating any company,

may also have to be considered.

In order to determine whether relevant arrangements exist, it will be necessary to consider:

• the Memorandum and Articles of Association of the company,
• any other document regulating the company,

and

• the various documents relating to loans made to the company.

Where a company other than the parent company holds the shares, etc, it may also be necessary to consider the shareholdings, etc, of that company.