Share for Share Exchange
A Share for Share Exchange occurs when shares in one company (Company A) are exchanged for shares in another company (Company B).
Sometimes the shareholders in Company B will be the same as the shareholders in Company A, but sometimes new shareholders will be introduced.
Share for Share Exchanges are used as a means to achieve a number of different aims in a variety of situations including:
- Company acquisitions – where a corporate buyer satisfies the payment of some, or all, of the purchase price for shares in another company by issuing shares in itself to the seller
- Group re-organisation – to protect assets or to create a new holding company to streamline a company before a disposal.
Frequently Asked Questions
Should tax advice be obtained?
Depending on the terms of the proposed transaction, share exchanges can give rise to significant tax consequences so we would always recommend that tax advice is obtained prior to a proposed Share for Share Exchange.
If certain conditions are satisfied, a Share for Share Exchange will be treated as a form of re-organisation for tax purposes and no tax charge will be payable at the time the share exchange is completed for peace of mind. It is possible to apply to HMRC to obtain an advance clearance that no tax will be payable because of a chargeable gain arising at completion of the share exchange.
We have granted Employee Share Options. Will those be affected?
The terms of any Share Option Scheme would need to be carefully reviewed when a share exchange would give rise to any unintended consequences for an existing Scheme. For example considering if in some circumstances, a share exchange may trigger an exercise condition which could enable an option holder to acquire shares in a company.
Sometimes share option rules will provide that option holders (who hold options over shares in a company) will have a right to swap those options over shares in another company in the event of a re-organisation.
If you would like support or assistance with any of the above, or would like a no obligation discussion about your options, please contact Blacks Solicitors’ Corporate team today via email or call 0113 207 0000.