VCM60154 - VCT scheme: general: exchange of shares or securities for those in another company: valuation of the new holding

SI2661/2002 Regulation 8 (2) & (3)

ITA/S278 & S289

A VCT can exchange a holding of old shares or securities in its’ investee company A for new shares or securities issued by company B (see VCM62400). Company B has acquired shares in Company A and issued, in consideration, its own new shares. Company B is sometimes called the ‘predator Company’ and Company A the ‘target Company’.

The shares or securities issued by company B are valued for the 15% holding limit condition, the 70% qualifying holding condition and the 30% eligible shares condition (see VCM60110 onwards) as follows.

The aggregate value of the new shares and new securities is calculated immediately after the last of the shares in or securities of company B to be issued in consequence of the exchange is issued, using the formula below. This value will then be used until the shares or securities fall to be revalued in accordance with ITA/S278(3) (see VCM60150).

The formula is:

Nv =Ov xNmv




Nmv + C

where

Nv =the aggregate value of the new shares and securities that you are calculating
Ov =the aggregate value of the old shares and securities when they were last valued (see VCM60150)
Nmv =the aggregate market value of the new shares and securities immediately after the last of the shares in or securities of company B to be issued in consequence of the exchange is issued
C =the aggregate market value immediately after the last of the shares in or securities of company B to be issued in consequence of the exchange is issued of:
(i) any monetary amount,
(ii) any monetary amount (without any discount for postponement of the right to receive payment or any part of it), and
(iii) any other consideration of receipt (except the new shares and securities,
received by the VCT as consideration for, or in respect of, the old shares or securities.

This same method of valuation is to be used to check that each qualifying holding comprises at least 10% eligible shares required by ITA/S289 (see VCM62030).

Where the value of the new shares or new securities issued to the VCT needs to be apportioned, see VCM60157.