This section applies where—
for the purposes of, or in connection with, a scheme of reconstruction an arrangement is entered into by all the participants holding units in an original collective investment scheme ("scheme A"), or where there are different classes of units in the scheme, all the participants holding any class of those units, and
under the arrangement—
units in a successor collective investment scheme or feeder fund ("scheme B") are issued to those participants in respect of and in proportion to (or as nearly as may be in proportion to) their relevant holdings in scheme A, and
the units in scheme A comprised in relevant holdings are retained by those participants or are cancelled or otherwise extinguished.
Where this section applies—
those participants are treated as exchanging their relevant holdings in scheme A for the units held by them in consequence of the arrangement, and
sections 127 to 131 (share reorganisations etc) apply with the necessary adaptations as if scheme A and scheme B were the same company and the exchange were a reorganisation of its share capital.
For this purpose units in scheme A comprised in relevant holdings that are retained are treated as if they had been cancelled and replaced by a new issue.
Where a reorganisation within case 2 of section 103F(1) of the units in scheme A is carried out for the purposes of the scheme of reconstruction, the provisions of subsections (1) and (2) apply in relation to the position after the reorganisation.
In this section, references to "relevant holdings" of units are—
where there is only one class of units in scheme A, to holdings of units in the scheme, and
where there are different classes of units in scheme A, to holdings of a class of units that is involved in the scheme of reconstruction (within the meaning of paragraph 3 of Schedule 5AZA).
This section has effect subject to section 103K(1) (scheme of reconstruction must be for bona fide commercial reasons and not part of tax avoidance scheme).