CFM16670 - Taxing loan relationships: convertible and exchangeable securities: taxing the holder: conditions relating to the shares

This guidance applies to periods of account beginning on or after 1 January 2005

Qualifying ordinary shares and mandatorily convertible preference shares

These types of shares are mentioned in FA02/SCH26/PARA45D and are defined as follows.

These are:

any shares, except those carrying a right to a fixed rate dividend but no other rights to share in profits, or
shares carrying no right to a dividend of any description, and no other rights.

Such shares must additionally be either:

listed on a recognised stock exchange, or
shares in a trading or holding company (within the meanings of TCGA92/SCHA1/PARA22A and 22(1)).

These are shares which:

represent the creditor loan relationship;
are not “qualifying ordinary shares” (within the above meaning); and
under the terms of the security must be converted into, or exchanged for, qualifying ordinary shares within 24 hours of being acquired by the holder.