VCM15200 - Investee companies: exchange for shares in new holding company

ICTA/S304A; ITA/S247; TCGA92/SCH5B/PARA8

ITA/S326; FA00/SCH15/PARA83

Normally an exchange of shares for other shares counts as a disposal. However, each of the schemes has provisions whereby in certain circumstances the new shares are effectively treated as being a continuation of the old holding. Thus the new shares are treated as having been issued when the old shares were issued and (in the case of EIS and CVS) the original qualification periods continue to run. The circumstances in which this treatment is available are where the effect of the exchange is to insert a new holding company over the original investee company. This may be done as part of a rationalisation of the structure of the business or in preparation for obtaining a listing on a stock exchange. The provisions do not apply where two companies become subsidiaries of the same new holding company or in the case of a take-over by an established company.

More detailed information can be found as follows: