Section 1041 | Section 1040: effect of entitlement to profits

(1)The seller's interest as a shareholder in the purchaser's group is not taken to be substantially reduced if—

(a)the seller would, if every member of the group distributed all its profits available for distribution immediately after the purchase (including any profits received by it on a distribution by another member), be entitled to a share of the profits of one or more of them, and

(b)the new entitlement exceeds 75% of the old entitlement.

(2)In subsection (1)—

“the new entitlement” means the share, or the aggregate of the shares, mentioned in subsection (1)(a), expressed as a fraction of the aggregate of the profits available for distribution of every member of the group which is—

(a)a relevant company, or

(b)a 51% subsidiary of a relevant company, and

“the old entitlement” means the corresponding fraction immediately before the purchase.

(3)Subsections (2) to (5) of section 1038 apply for the purposes of this section as they apply for the purposes of section 1038(1).