European Union: Private Equity Bulletin

Entrepreneurs' Relief – Help with ABCs

Having tightened the tests to be met for Entrepreneurs' Relief (ER), without consultation, the Government has now listened to the industry and produced a solution which should work in most cases.

In order to counter tax planning which had the aim of obtaining undeserved ER, by creating "tailored" shares i.e. shares designed to obtain relief without any real commercial downside risk, the test for ER was widened in the October Budget. Shareholders had previously been required to meet the old test for a "personal company" of having at least 5% of ordinary shares by nominal value and 5% of the voting rights of the company deriving from these shares. The new tests added that with effect from 29 October 2018, the individual should also be beneficially entitled to:

i) at least 5% of profits available for distribution to equity holders; and

ii) at least 5% of assets available to equity holders on a winding up.

No-one could argue that this widening would not have restricted the relief, but it had the unfortunate effect of stopping ER being given in common situations where there was no avoidance. One such instance is alphabet stock: if shareholders A, B and C have A, B and C class shares, they would fail this new test. This is because different dividends could be declared on the different classes and therefore shareholders are not strictly entitled to the profits, as they would never know what they were going to receive until the dividends were actually declared. This would have been the case even if A, B and C each owned a third of the ordinary share capital and there were no other shareholders.

After protests from the industry, HMRC announced an alternative test to these new tests. These were announced in December but have effect from 29 October 2018 (Budget day) as if this had been the drafting all along. This alternative test measures "...whether in the event of a disposal of all of the ordinary shares, the individual in question would receive at least 5% of the proceeds." If so, provided the old tests were also met, the relief would be available. Therefore if in our example A, B and C each receive a third of the sale proceeds, then they would obtain ER despite not being technically entitled to dividends and assets on a winding up.

Preparing Technology Arrangements for Brexit

The ultimate form of the UK's exit from the European Union shall remain a hotly debated topic.

The purpose of this article is to highlight some key risks of either the No Deal scenario or a deal on the terms of the Draft Withdrawal Agreement (as advocated by Prime Minister Theresa May) which relate specifically to technology arrangements and the steps to mitigate these risks.


UK businesses will need to consider the basis upon which personal data can be transferred internationally. The UK government has indicated that it will (continue to) treat the remaining EU countries as having adequate data protection regimes, so no additional steps will need to be taken to transfer personal data to the remaining EU countries.

What is currently less clear is whether transfers of personal data from the remaining EU countries to the UK will be permitted on the basis that the UK is deemed to (continue to) have an adequate data protection regime, especially in a No Deal scenario. The simplest solution is likely to be putting in place the EU approved Standard Contractual Clauses.

Businesses exporting personal data from the UK to third countries will also have to ensure that they comply with the UK specific rules on export of personal data from the UK to third countries. A particular point to look out for is whether all the countries which the EU has accepted as having an adequate data protection regime will be regarded by the UK as also having an adequate data protection regime.


When the UK leaves the EU, the EU Database Directive, which created the Sui Generis right to protect databases, will cease to apply to the UK. Under the Draft Withdrawal Agreement, a database will continue to be protected where it is created by UK nationals, natural persons with habitual residence in the UK or businesses established in the UK. In the No Deal scenario, the ironic position will be that EU nationals, residents and businesses in the UK will acquire the Sui Generis right when they develop databases in the UK but UK nationals, residents and businesses will not.

UK domestic businesses can minimise the risk of losing protection for databases developed in the UK by involving developers with an EU connection. Also, the database would be protected internationally through the copyright system if sufficient creativity can be established for the database to be protected as a copyright work.


Fractured supply chains is an area of concern in a No Deal scenario for technology arrangements where continued access to hardware and consumables will be required. To prepare for this, businesses should be revisiting their supply chains and inventory to ensure that the impact of delays in customs processes etc. are minimised.

In the Draft Withdrawal Agreement scenario, the disruption should be minimal as goods first lawfully put on the market in the EU or in the UK prior to the end of the transition period can circulate between the two markets before they reach the end user.


Businesses should carry out a 'people audit' to map out the locations of the direct workforce and, for outsourced arrangements, those of its third party suppliers.

Regardless of the outcome of the EU negotiations, the UK government will proceed with its settlement scheme which will allow EU nationals to apply for settled status, provided they have arrived in the UK by the end of 2020. Businesses should consider helping those who qualify for the scheme to take advantage of it, particularly if they are in key roles.

In relation to UK nationals based in the EU, some EU governments—for example the Netherlands—have made welcoming noises, promising measures to allow such individuals to remain there after March 2019 in the event of a No Deal scenario. Businesses should focus on those EU countries that are most relevant to its workforce and monitor developments of any such legislation.


For all material technology arrangements contractual frameworks should be reviewed in the context of Brexit. Key areas to review include: (1) Pan-European arrangements, (2) territorial scope of licences, (3) location of personal data, (4) rights in databases, (5) currency/inflation indices, (6) compliance with laws obligations and (7) TUPE/ARD on termination.

To read the full article click here

Visit us at

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2019. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions