Section 946 | Rules for determining “L”

(1)This section applies for the purposes of section 945(2) (determination of “L”).

(2)A liability is to be ignored if—

(a)the predecessor was the predecessor in relation to a transfer of a trade on a previous application of this Chapter, and

(b)on that previous application of this Chapter the liability was apportioned under section 952 to a trade carried on by the company that was the successor on that application.

(3)Subsection (4) applies if—

(a)the predecessor transfers a liability to the successor, and

(b)the creditor in question has agreed to accept settlement of part of the liability as settlement for the whole of it.

(4)The transfer of the liability is taken to cover only the part of the liability mentioned in subsection (3)(b).

(5)The predecessor's capital is to be treated as a liability of the predecessor so far as it is recently converted capital (but not otherwise).

(6)For the purposes of subsection (5) a part of the predecessor's capital is recently converted capital if—

(a)it was issued or otherwise originated on the conversion of a liability that was not part of the predecessor's capital or on the conversion of a part of that capital that was itself recently converted capital, and

(b)the conversion occurred during the period of 12 months ending with the day on which the transfer of the transferred trade occurs.

(7)In this section “the predecessor's capital” means the predecessor's share capital, share premium account, reserves and relevant loan stock.

(8)In subsection (7) “relevant loan stock” means any loan stock or similar security (whether secured or unsecured) other than any to which subsection (9) applies.

(9)This subsection applies to any stock or security if, when the liability giving rise to the stock or security was incurred, the person who was the creditor was carrying on a trade of lending money.