Share exchanges - simple or not?

Share exchanges - simple or not?

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Client holding company with 3 equal shareholders owns 3 profitable trading subsidiaries 100%.

The shareholders (also working directors) have now decided to split the group and effectively take a company each. The profitability and assets of the companies are remarkably similar and no money will be changing hands.

What mechanism do we need to implement the new structure?

Is it as simple as transferring the shares to the individuals at par?

Are share for share exchanges a better option?

Do we need clearance?

Do we need the lawyers/specialists? 

I am really at the thinking this through stage and would welcome any comments.

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By MBK
29th Feb 2012 13:59

No - it's not simple.

If you transfer the shares in the subs to the individuals that is a distribution by the holding company - so the value of the shareholdings would be taxable on the individuals.

And the holding company would be making a disposal of the shares in the subs. It wouldn't qualify for the SSE befcause it wouldn't be trading after - so CT payable on the value of the shares less base cost.

Paper for paper doesn't work either.

On the basis of what you have said this would sem right for an exempt demerger. You will need clearance from HMRC, some decent tax advice and good corporate lawyers. We're in the south east and I would be telling clients to budget £15 - £20k in fees.

 

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