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Tax consequences of issuing bonus shares

Client wishes to acquire 75% of share capital of target company.  At present issued share capital in that company is 3 ordinary £ 1 shares.  Easiest way would seem to be company issue say 97 bonus shares to rank parri passu with existing shares and client acquires 75 of total issued share capital.

Query is what are the tax consequences on both the individuals in receipt of the bonus shares and the company.

Alternatively would it be better to hive the business down into newco by say issuing 33 and a third shares in newco for every one share in existing company and acquire 75 % of the shares in newco.

Comments appreciated !

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By Anonymous
11th Sep 2009 11:39

a bonus share issue

(i.e.  literally allocating new shares to existing shareholders exactly in proportion to their existing shareholdings) would not have any tax consequence for the company or the individuals.   The sale / disposal of shares post the bonus issue obviously does.

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14th Sep 2009 08:36

Easiest Way?
Could you not achieve the same thing by sub-dividing the 3 £1 shares into 300 1p shares and then have the purchaser buy 225 of those shares from the vendor.

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