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Share for share exchange

Is it worth getting a solicitor involved?

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Have a client with a trading Company that wants to insert a parent company to hold the shares in trading Co. Beneficial ownership won't change. 

Is it as simple as obtaining HMRC clearance, completing a stock transfer form and alloting shares in parent co?

Or do I need a solicitor for a share for share agreement? 

Thanks

 

Replies (11)

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By johngroganjga
14th Apr 2021 15:19

I don’t think you need a written agreement.

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Replying to johngroganjga:
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By Hugo Fair
14th Apr 2021 15:29

And "HMRC clearance" - for what?

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Replying to Hugo Fair:
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By The Dullard
14th Apr 2021 15:49

TCGA 1992, s 138 and ITA 2007, s 701 usually.

I like an SPA myself, and some decent board minutes.

The SPA, if any, and the stock transfer form need adjudicating (as exempt from ad valorem Stamp Duty) by the Stamp Office under FA 2006, s 77 (or is it s 75, I can never remember which one's which).

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Replying to The Dullard:
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By Hugo Fair
14th Apr 2021 17:33

It never works when I try 'do' brevity!
What I meant was ... when OP said "Is it as simple as obtaining HMRC clearance", what did he think this involved (in case he was making wrong assumptions - which is ironical given the confusion I've caused).
But thanks for the references.

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Replying to Hugo Fair:
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By The Dullard
14th Apr 2021 18:33

Share for share exchanges are quite straightforward if (i) you know what you're doing, and (ii) you have HMRC clearance (which has become less easy of late, although they tend to back down when you ask for the matter to be considered by the tribunal).

NB For readers. There are situations where you might not even bother with clearance.

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By paul.benny
14th Apr 2021 15:31

Mr/s Anonymous - you've not given us all the relevant facts. John may well be right but it's not necessarily as simple as that.

How many shareholders are there? If there is more than one, they probably all need to consent. And if there is a shareholder agreement, this may well need to be updated

You say this is client's idea. Have you enquired as to their reasons and what they hope to achieve by this? Has the impact on the ability to pay dividends been considered?

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Replying to paul.benny:
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By The Dullard
14th Apr 2021 15:51

Quote:

Has the impact on the ability to pay dividends been considered?

Have you? Do you think the holding company will be able to pay less dividends than the existing company? I don't

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Replying to The Dullard:
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By paul.benny
14th Apr 2021 16:35

We simply can't tell from the OP as we don't know the rationale for this plan.

Holdco has no distributable profits until it receives some income - which might be dividends from subisd. Or there might also have some income and/or expenditure directly earned by holdco.

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Replying to paul.benny:
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By The Dullard
14th Apr 2021 18:29

Quote:

Holdco has no distributable profits until it receives some income - which might be dividends from subisd.

This is my point, Holdco is capable of paying any dividend that the subsidiary is capable of paying. I can tell that without any further information.

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Ivor Windybottom
By Ivor Windybottom
14th Apr 2021 16:29

You may want a solicitor's involvement if the holding company has any reason for its existence. For example if it is introduced to hold assets and protect them from trading risk then a solicitor may be useful to draw up any necessary paperwork.

The Stamp Duty adjudication is important if a later sale arises so cannot be overlooked. It is straight forward, but very time consuming if done properly, so passing it off to a solicitor may save your time (but not the client's money!).

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Replying to Ivor Windybottom:
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By The Dullard
14th Apr 2021 18:26

The Stamp Duty adjudication isn't something I'd trust a solicitor with. I only trust them with the SPA because (i) I have to, and (ii) it's going to say what I tell them it's going to say.

As a general rule with solicitors they should be thrown further than they're capable of being trusted. I mean they shouldn't be trusted any further than they're capable of being thrown, my bad.

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