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Guidance on rule 7.7 Acquisition of shares of company – Rule 7.7 The acquisition of more than 10% of the issued share capital of a company – but not a stake which would lead to the other company becoming a subsidiary - is subject under rule 7.7 to a notification requirement. “Subsidiary” is defined in the Financial Services Act 2008 principally by reference to section 1 of the Companies Act 1974. Licenceholders should note that if the Commission is not satisfied with a proposal of which it is notified, it may issue a direction to restrict or prevent the change. The Commission would expect the licenceholder to supply supporting and background information. A list of the type of information that would be expected is set out below. The considerations are broadly similar to those which apply to rule 7.5 “Acquisition etc. of business” and rule 7.8 on “Subsidiaries etc.” Details of the proposed acquisition i. A copy of any sale and purchase agreement ii. The proposed completion date iii. The rationale for the acquisition iv. A proposed management and staff plan reflecting any proposed changes to the structure v. Vetting information for any new vettable persons vi. What due diligence is being undertaken by the purchaser? vii. Any changes to the corporate strategy viii. Any changes to the business resumption plans ix. Any PII implications and if so, arrangements for the extension of PII cover x. Any notification to clients (if they are affected) xi. Any changes to level of protection of clients’ assets (if they are affected) Corporate governance xii. A proposed updated structure chart for the group xiii. Any proposals for management involvement xiv. Identified risks and proposals for risk management (rule 8.6) Financial and business planning January 2011 Guidance on rule 7.7 xv. An updated business plan for the licenceholder under rule 8.9, if the acquisition will have a material effect xvi. Projected financial resources calculations for the licenceholder in the format set out in Schedule 2.3 of the Rule Book, as at the end of the first and second years of trading - if the acquisition will have a material effect AML-CFT xvii. What AML-CFT standards apply if the business is off-Island (paragraph 14 of the POCML Code 2010 only applies to branches or subsidiaries, but we would expect a licenceholder to address the issue in due diligence). Guidance is available at paragraph 2.6 of the Anti Money Laundering Handbook Outsourcing or insourcing xviii. Arrangements for any outsourcing or insourcing under rule 8.13 Regulation xix. Are any licences to be amended? xx. Any outstanding regulatory matters that need to be concluded xxi. Details of any overseas regulator, who regulates some or all of the parties to the new structure. The Commission will contact the regulator under statutory gateways. January 2011