‘Earn-out’ rights

ITTOIA05/S442 prevents a security being treated as a deeply discounted security merely because it was issued to satisfy a ‘qualifying earn-out right’. A qualifying earn-out right is where

a person transfers shares or debentures in a company, or the whole or part of, or an interest in a business, in return for unascertainable deferred consideration, and

the deferred consideration takes the form of a right to receive a security such as loan notes at a later date.

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