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YC 16: Disregarding market value changes
or “Ignoring changes in company value for certain rules”
You could also call this:

“Rules for when an insurance company changes to a regular company structure”

This section talks about what happens when an insurance company changes from being a special type of company to a regular company. This change is called demutualisation.

When an insurance company changes like this, some special rules apply to the people who get shares in the company:

If you were a member of the insurance company before the change and you get shares because of your membership, it’s treated as if you’ve owned those shares the whole time the company was special.

If a trust gets shares for the benefit of members, and the trust was set up before the change to hold shares temporarily or to vote for members, it’s treated as if it owned the shares the whole time the company was special.

If the shares from the trust are given out to members or a holding company gives out shares, and you get shares because you were a member, it’s treated as if you’ve owned those shares the whole time the company was special.

If a community trust gets shares for the benefit of the community that includes former members, it’s treated as if it owned the shares the whole time the company was special.

There are also special rules about company losses and credits:

If the insurance company or a related company had a loss before the 1992-93 tax year, this loss is treated as if it happened on the first day of the 1992-93 tax year.

If the insurance company or a related company had a credit before 1 April 1992, this credit is treated as if it first appeared on 1 April 1992.

These rules help to make sure that the change from a special company to a regular company doesn’t cause problems with taxes or ownership.

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Next up: YC 18: Reverse takeovers

or “Rules for when a company takes over another company's subsidiary”
Next

Part Y Definitions and related matters
Measurement of company ownership

YC 17Demutualisation of insurers

  1. This section applies if an insurer stops being a special corporate entity as a result of demutualisation.

  2. Subsection (3) applies if—

  3. a person acquires a voting interest or a market value interest in an insurer on the demutualisation of the insurer; and
    1. immediately before the demutualisation, the person was a member of the insurer; and
      1. the interest is acquired solely as a result of that membership.

        1. With effect from the date of the acquisition but subject to section YC 10, the person is treated as having held the voting interest or market value interest at all times during the period in which the insurer was a special corporate entity.

        2. Subsection (5) applies if—

        3. a person acquires a voting interest or a market value interest in a life insurer on the demutualisation of the life insurer; and
          1. the person is the trustee of a trust for the benefit of persons who were members of the life insurer immediately before the demutualisation; and
            1. the trust was established before the demutualisation process—
              1. as an interim holding vehicle pending distribution to the members of all shares held by the trust:
                1. to exercise voting rights on behalf of the members in relation to any holding company established before the demutualisation process which holds all the shares in the life insurer; and
                2. the Commissioner considers that the trust falls within paragraphs (b) and (c), and has notified the trustee.

                  1. With effect from the date of the acquisition, the trustee is treated as having held the voting interest or market value interest at all times during the period in which the life insurer was a special corporate entity.

                  2. Subsection (7) applies if—

                  3. subsection (5) applies; and
                    1. the notional single person referred to in section YC 10 acquires a voting interest or market value interest in the life insurer on—
                      1. the distribution by the trustee of the shares from the trust:
                        1. the issue of shares by the holding company; and
                        2. the person referred to in section YC 10(1), whose direct voting interest or direct market value interest is treated under section YC 10 as that of the notional single person resulting in the notional single person’s interest in the life insurer,—
                          1. was a member of the life insurer immediately before the demutualisation, or is a trustee of a trust for the members; and
                            1. acquired the direct voting interest or direct market value interest as a result of the membership.

                            2. With effect from the date of the acquisition, the notional single person is treated as having existed and having held the voting interest or market value interest at all times during—

                            3. the period in which the life insurer was a special corporate entity; and
                              1. the period of the trust before the acquisition by the notional single person.

                                1. Subsection (9) applies if—

                                2. a person acquires a voting interest or a market value interest in an insurer on and solely as a result of the demutualisation of the insurer; and
                                  1. the person is the trustee of a community trust for the benefit of some or all of a community which generally includes persons who were members of the insurer immediately before the demutualisation; and
                                    1. the Commissioner considers that the trust falls within paragraph (b) and has notified the trustee.

                                      1. With effect from the date of the acquisition, the trustee is treated as having held the voting interest or market value interest at all times during the period in which the insurer was a special corporate entity.

                                      2. Subsection (11) applies if—

                                      3. an insurer undergoes demutualisation; and
                                        1. the insurer, or another company that is part of the same group of companies (the loss company), had a net loss in a tax year before the 1992–93 tax year; and
                                          1. the loss company carried the loss forward to the 1992–93 tax year under the Income Tax Act 1976; and
                                            1. the loss has not been offset against net income for any period before demutualisation.

                                              1. Despite section IZ 5 (Companies’ tax losses for tax years before 1991–92 tax year) for the purposes of Part I (Treatment of tax losses), with effect from the date on which the insurer stops being a special corporate entity on the demutualisation, the loss is treated as having arisen on the first day of the loss company’s 1992–93 tax year and not to have arisen in the earlier tax year.

                                              2. Subsection (13) applies if—

                                              3. an insurer undergoes demutualisation; and
                                                1. the insurer or another company that is part of the same group of companies has, at the time of the commencement of the process of demutualisation, a credit that arose before 1 April 1992 in—
                                                  1. its imputation credit account.

                                                      2. Despite section OZ 4 (Terminating modifications to debits for loss of shareholder continuity), for the purposes of Part O (Memorandum accounts), with effect from the date on which the insurer stops being a special corporate entity on the demutualisation, the credit is treated as having first arisen in the account on 1 April 1992 and not when it actually arose.

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                                                      Notes
                                                      • Section YC 17(12)(b)(i): amended, on , by section 292(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                                                      • Section YC 17(12)(b)(ii): repealed, on , by section 292(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                                                      • Section YC 17(12)(b)(iii): repealed, on (applying for income years beginning on or after that date), by section 133(1) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                                                      • Section YC 17 list of defined terms FDP account: repealed, on , by section 292(3) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).