Download Formation of a subsidiary – Rule 7

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