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YC 18: Reverse takeovers
or “Rules for when a company takes over another company's subsidiary”
You could also call this:

“Changes in company structure that don't affect who really owns the business”

This section of the law talks about what happens when companies reorganise themselves. It applies when a company (called the initial parent) changes its structure so that a new company (called the new parent) takes over ownership.

For this law to apply, a few things need to happen:

  1. The initial parent must own parts of another company.
  2. The new parent must end up owning parts of the initial parent.
  3. The people who owned parts of the initial parent must get the same percentage of ownership in the new parent.
  4. The owners shouldn’t get any extra benefits from this change, except for their new ownership in the new parent.

If all these things happen, the law treats the new parent as if it had always existed and owned the parts of the other companies that the initial parent used to own. This is important for figuring out things like tax credits and losses.

The law also says that changes that happen after this reorganisation can still affect how the companies are treated for tax purposes.

Lastly, the law explains that some special types of shares (called excluded preference shares) are not counted when looking at these ownership changes.

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Next up: YC 18C: Railways restructure not affecting Crown economic ownership

or “Crown remains economic owner despite railway restructure”
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Part Y Definitions and related matters
Measurement of company ownership

YC 18BCorporate reorganisations not affecting economic ownership

  1. Subsection (3) applies if a company (the initial parent) enters into an arrangement described in subsection (2).

  2. The description of the arrangement for the purposes of subsection (1) is as follows:

  3. the initial parent is a limited attribution company that is treated under section YC 11(3) and (4) as holding ownership interests (the included ownership interests) that are not excluded preference shares in another company before the arrangement is entered into; and
    1. the ownership of the initial parent is reorganised so that another company (the new parent) is a limited attribution company that is treated under section YC 11(3) and (4) as holding included ownership interests in the initial parent after the arrangement is implemented; and
      1. the percentage included ownership interests (the final percentage) that a person receives in the new parent is the same as their percentage included ownership interests (the initial percentage) in the initial parent that they cease to hold as a result of the arrangement. For the purposes of this paragraph, a difference between the initial and final percentages is ignored if the difference is caused by a transfer or non-transfer of included ownership interests that—
        1. facilitates the arrangement, and the relevant included ownership interests have a market value that is merely nominal relative to the value of the included ownership interests in the new parent:
          1. is the direct result of impossibility or impracticability caused by securities law requirements; and
          2. a person holding included ownership interests in the initial parent before the arrangement is entered into does not receive a dividend, gift, or other direct benefit as a result of the arrangement. For the purposes of this paragraph,—
            1. included ownership interests in the initial parent for which paragraph (c)(ii) applies are excluded from a person's holding of included ownership interests:
              1. included ownership interests in the new parent are excluded from being a dividend, gift, or other direct benefit.

              2. For the purposes of the tests of ownership and control in Part I and subparts LP, OA, OB, OC, and OP (which relate to loss balances, tax credits, and memorandum accounts), starting from when the initial parent is first treated under section YC 11(3) and (4) as holding the included ownership interests in another company, the new parent is treated as—

              3. existing and having the shareholders it has immediately after the arrangement's implementation:
                1. holding the included ownership interests that the initial parent is treated under section YC 11(3) and (4) as holding:
                  1. holding all included ownership interests in the initial parent.

                    1. Subsection (3) does not prevent a change in shareholders, the holdings of included ownership interests, or other circumstances, after the implementation of the arrangement from having an effect on the application of the continuity provisions and the provisions described in subsection (3) after the implementation of the arrangement.

                    2. In this section,—

                      1. excluded preference share means a share that is disregarded, under section 703–37 of the Income Tax Assessment Act 1997 (Aust), in determining whether a company can be a subsidiary member of a consolidated group for the purposes of that Act.

                        Notes
                        • Section YC 18B: inserted (with effect on 1 April 2008), on , by section 570 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                        • Section YC 18B(2)(a): amended (with effect on 1 April 2015), on , by section 282(1) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                        • Section YC 18B(2)(b): amended (with effect on 1 April 2015), on , by section 282(2) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                        • Section YC 18B(2)(c): amended (with effect on 1 April 2015), on , by section 282(3) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                        • Section YC 18B(2)(c): amended, on , by section 157 of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                        • Section YC 18B(2)(c)(i): amended (with effect on 1 April 2015), on , by section 282(3) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                        • Section YC 18B(2)(d): amended (with effect on 1 April 2015), on , by section 282(4) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                        • Section YC 18B(2)(d)(i): amended (with effect on 1 April 2015), on , by section 282(4) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                        • Section YC 18B(2)(d)(ii): amended (with effect on 1 April 2015), on , by section 282(4) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                        • Section YC 18B(3): amended (with effect on 1 April 2015), on , by section 282(5) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                        • Section YC 18B(3): amended, on (applying for income years beginning on or after that date), by section 134(1) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                        • Section YC 18B(3)(b): amended (with effect on 1 April 2015), on , by section 282(5) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                        • Section YC 18B(3)(c): amended (with effect on 1 April 2015), on , by section 282(5) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                        • Section YC 18B(4): amended (with effect on 1 April 2015), on , by section 282(6) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                        • Section YC 18B(5)(a): repealed (with effect on 1 April 2015), on , by section 282(7) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).