REVISED PROPOSALS REGARDING HYBRID EQUITY INSTRUMENTS AND THIRD PARTY BACKED SHARES – SECTIONS 8E AND 8EA

Thursday, August 11, 2011
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One of the proposed amendments was intended to increase the redemption period central to the application of section 8E from 3 years to 10 years. If the proposal became law, it would have meant that in order to avoid the application of section 8E, an investor would have had to hold a share for at least 10 years and a day before redemption, which usually would not be feasible. Another proposal relating to section 8E was intended to extend the application of section 8E to foreign dividends, with the consequence that both domestic and foreign dividends received or accrued in respect of a hybrid equity instrument would be deemed to be interest in relation to their recipient. The reaction to the proposal to increase the redemption period was that it would place many funding structures at risk.

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