A corporate group were looking for an external investor to acquire a minority stake in the business to fund the exit of one of the owners and the further capitalisation of the business. As part of the structuring of the transaction, a concern was raised around the potential application of the transactions in securities rules.

The client submitted a clearance application to HMRC in relation to the transactions in securities rules which was subsequently rejected.

While a failed clearance request is typically fatal to the availability of an insurance solution, the reason for the consideration being structured in this way was that the investor was prevented by its internal compliance requirements from taking a majority stake in any business. As such, there was a clear commercial justification for the consideration being structured as it was. In addition, it was possible to offer an insurance solution because the premium charged for this solution was c.10% to reflect the increased risk and also because the insured limit was less than £2 million.