Income Tax Act 2007 section 257CD

The no pre-arranged exits requirement

Section 257CD prevents SEIS relief from applying where the arrangements surrounding a share issue include pre-planned exit routes, such as the disposal of shares or assets, the cessation of trade, or protection of investors against normal commercial risks.

• The share issue arrangements must not include plans for the subsequent repurchase, exchange or disposal of the shares or other securities in the issuing company, nor for the cessation of any trade carried on by the company or a connected person, nor for the disposal of a substantial amount of the company's or a connected person's assets
• The arrangements must not have as a main purpose the provision of partial or complete protection (through insurance, indemnity, guarantee or otherwise) for investors against the normal risks of their investment
• Certain arrangements are excluded from the prohibition: share-for-share exchanges under section 257HB(1), conversions of shares into a different class in the same company, winding-up arrangements that apply only on a genuine commercial winding up, and normal commercial insurance or risk protection for the issuing company or its subsidiaries in the course of carrying on business
• The definition of "issuing arrangements" is broad, covering not only the arrangements under which the shares are issued but also any prior arrangements connected with the issue, and any arrangements made during period B if information about possible pre-arranged exits was made available to prospective subscribers before the shares were issued