A court scheme of arrangement is sometimes used by companies as an alternative to a straightforward takeover offer for a target company. Where a cancellation scheme is used, the 0.5% stamp duty charge is saved.
In early 2015, the Government will bring forward amendments to s641 Companies Act to prohibit the cancellation of share capital by target companies where there is a takeover arrangement.
This change will affect the legal mechanisms that can be used for takeovers undertaken by corporates. In such situations a cancellation scheme of arrangement is likely to be prohibited.