STSM042560 - Section 77A 바카라 사이트� Capital Reduction Demergers 바카라 사이트� Example Demerger and Stamp Duty Implications 바카라 사이트� Example Four

Targetco was formed five years ago and is owned by members of the Red Family (60% collectively) and Green Family (40% collectively).

The ownership of Targetco is split as follows:

Red Family (60%):
  1. Tom Red 바카라 사이트� who holds 20% of the issued shares
  2. Tim Red 바카라 사이트� who holds 20% of the issued shares
  3. Ted Red 바카라 사이트� who holds 20% of the issued shares
Green Family (40%):
  1. Tilly Green 바카라 사이트� who holds 20% of the issued shares
  2. Tess Green 바카라 사이트� who holds 10% of the issued shares
  3. Thea Green 바카라 사이트� who holds 10% of the issued shares

The Red and Green families decided to go their separate ways and wish to split the business up between them. They do this by carrying out a capital reduction demerger:

바카라 사이트� Step One 바카라 사이트� A new holding company is inserted

A new holding company (Acquire Co) acquires 100% of the issued share capital of Targetco, through a share for share exchange. The consideration given by Acquire Co is the issue of new shares in proportion to the 6 shareholders of Targetco (20/20/20- 20/10/10).

바카라 사이트� Step Two 바카라 사이트� Targetco distributes assets to Acquire Co

Targetco declares a dividend in specie to Acquire Co of 60% the trade and assets relating to the business.

바카라 사이트� Step Three 바카라 사이트� Acquire Co reorganizes its share capital

Acquire Co reclassifies its ordinary shares into 바카라 사이트淩 ordinary바카라 사이트� and 바카라 사이트淕 ordinary바카라 사이트� shares. The R shares (held by the Red family members) give rights to 60% of the business and assets and the G shares (held by the Green family members) give rights to the remaining 40%.

바카라 사이트� Step Four 바카라 사이트� Acquire Co carries out a capital reduction

Acquire Co reduces its share capital. This allows it to make a distribution in specie of its 100% shareholding in Targetco to a new company (Newco). Newco issues shares of equivalent value to the Green family members as consideration. The G shares in Acquireco are cancelled.

바카라 사이트� Final Structure
  • Targetco is owned by Newco, which in turn is owned by the Green family members;
  • Acquire Co is owned by the Red family members.

Stamp Taxes on Shares Implications

Relief under s.77 FA1986 would be available on Step One, as the Red Family members remain in control of the acquiring company (Acquire Co) throughout the subsequent steps.

This analysis is not dependent on or affected by the changes to s.77A FA1986 made by FA2020 (see STSM042460).

Relief under s.75 FA1986 would not be available on Step 4, as the shareholding does not mirror (see STSM042370).