Facts of The Case
The facts of the case are of less significance than the general principle which arose from it. However, in summary, they are:
- The three respondents, the Dawsons, were a father and his two sons. They owned two successful clothing companies called Fordham and Burton Ltd. and Kirkby Garments Ltd. (which are together called "the operating companies" throughout the case).
- A company called Wood Bastow Holdings Ltd. offered to buy the operating companies from the Dawsons, and a price was agreed.
- If the Dawsons had sold the operating companies direct to Wood Bastow the Dawsons would have had to pay substantial capital gains tax ("CGT").
- There was a rule that if a person sold his shares in Company A to Company B, and instead of receiving cash he received shares in Company B, then there was no CGT payable immediately. Instead, CGT would become payable when (if ever) that person later sold his shares in company B.
- With the intention of taking advantage of this rule to delay the payment of CGT, the Dawsons arranged for an Isle of Man company called Greenjacket Investments Ltd. to be formed. (It was intended to become "Company B".)
- The Dawsons sold the operating companies to Greenjacket Investments Ltd. in exchange for the shares of Greenjacket Investments Ltd.
- Greenjacket Investments Ltd. sold the operating companies to Wood Bastow Holdings Ltd.
Read more about this topic: Furniss V Dawson
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