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share for share exchange purchase consideration

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The shareholders of company B, C and D have acquired shares in a new holding company A in exchange for their shared in B,C,D. No money changed hands.

Am I correct in saying the purchase consideration is the fair value of the shares in B/C/D? In which case it is pretty hard to ascertain this since its a private company. Would I simply use the nominal value of the shares in B/C/D?

Comapny B also has a share premium account of c£300k. Would this form part of the purchase consideration also?

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09th Jul 2019 19:37

The purchase consideration is indeed the market value of the shares in the subsidiary. That may or may not coincidentally be the same as the nominal value. The share premium is irrelevant.

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By johnt27
10th Jul 2019 15:02

If you've done a share for share exchange you must surely have done valuations in order to ascertain how many shares to issue in appropriate proportions to the value of each company notionally acquired?

If not, how are you going to deal with the paperwork for Companies House and HMRC, let alone the accounting?

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to johnt27
10th Jul 2019 15:47

I don't agree that a valuation would be required for the purposes of determining the number of shares to be issued.

If, say, B C and D (all with different values) each had 100 shares in issue there would be nothing to prevent A issuing 300 shares (nor indeed only 100 shares) to the shareholders. But I agree that a valuation will be required, to determine the amount of share premium to be recognised in A (and consideration to be entered on the stock transfer forms).

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to johnt27
10th Jul 2019 15:44

The share for share exchange was a straight exchange of the company shares in each subsidiary for shares in the new holding company.

HMRC clearance was sought before the exchange went ahead.

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