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COLL 7.6 Schemes of arrangement

Schemes of arrangement: explanation

COLL 7.6.1GRP

  1. (1)

    A proposal that an authorised fund should be involved in a scheme of arrangement is subject to written notice to and approval by the FCA under section 251 of the Act (Alteration of schemes and changes of manager or trustee), section 261Q of the Act (Alteration of contractual schemes and changes of operator or depositary)2 or regulation 21 of the OEIC Regulations (The Authority's approval for certain changes in respect of a company). Effect cannot be given to such a change except in accordance with that section or regulation.

  2. (2)

    The issue of units in exchange for assets as part of an approved scheme of arrangement is subject to:

    1. (a)

      COLL 6.2.5 R and COLL 6.2.6 R (Issue and cancellation of units);

    2. (b)

      COLL 6.2.15 R (In specie issue and redemption); and

    3. (c)

      COLL 7.6.2 R(Scheme of arrangement: requirements).

  3. (3)

    COLL 7.6.2 R (3) to (6) apply to a domestic UCITS merger.3 Arrangements constituting any such merger are in addition subject to the requirements of COLL 7.7 (UCITS mergers).3

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Schemes of arrangement: requirements

COLL 7.6.2RRP

  1. (1)

    If a scheme of arrangement is entered into in relation to an authorised fund ("transferor fund") or a sub-fund of a scheme which is an umbrella ("transferor sub-fund"), an authorised fund manager must ensure that the unitholders of the transferor fund or sub-fund do not become unitholders of units in a collective investment scheme other than a regulated collective investment scheme.

  2. (2)

    For a UCITS scheme or a sub-fund of a UCITS scheme, (1) applies as if the reference to a regulated collective investment scheme also excludes any recognised scheme which is authorised under the UCITS Directive in an EEA State but was not a3 ‘recognised scheme’ under section 264 of the Act (Schemes constituted in other EEA States) immediately before IP completion day43.

  3. (3)

    Where, for the purpose of a scheme of arrangement, it is proposed that scheme property of an authorised fund should become the property of another regulated collective investment scheme or sub-fund of a regulated collective investment scheme, the proposal must not be implemented without the sanction of an extraordinary resolution of the unitholders in the authorised fund, unless (4) applies.

  4. (4)

    Where, for the purposes of a scheme of arrangement, it is proposed that scheme property attributable to a sub-fund of an umbrella should become the property of another regulated collective investment scheme or of another sub-fund of a regulated collective investment scheme (whether or not of that umbrella), the proposal must not be implemented without the sanction of:

    1. (a)

      an extraordinary resolution of the unitholders in the sub-fund of that umbrella; and

    2. (b)

      (unless implementation of the scheme of arrangement is not likely to result in any material prejudice to the interests of the unitholders in any other sub-fund of that umbrella) an extraordinary resolution of the unitholders of units in that umbrella.

  5. (5)

    If it is proposed that an authorised fund or sub-fund of an umbrella should receive property (other than its first property) as a result of a scheme of arrangement (or an arrangement equivalent to a scheme of arrangement) which is entered into by some other collective investment scheme or sub-fund, or by a body corporate, the proposal must not be implemented without the sanction of an extraordinary resolution of the unitholders in the authorised fund or (as the case may be) of the class or classes of units related to the sub-fund unless (6) applies.

  6. (6)

    This paragraph (6) applies if the directors of the ICVC or the authorised fund manager2 and depositary2 of the AUT or ACS2 agree that the receipt of the property concerned for the account of the ICVC,2 AUT or ACS2:

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    1. (a)

      is not likely to result in any material prejudice to the interests of the unitholders of the authorised fund;

    2. (b)

      is consistent with the objectives of the authorised fund or sub-fund; and

    3. (c)

      could be effected without any breach of a rule in COLL 5(Investment and borrowing powers).