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Merging rules
Key points
- How will restructure transactions proposals affect the accounts of the companies being restructured.
- CA 2006 s 612 (merger relief) will only apply if at least 90% of the share capital of the target company is being acquired.
- If less than 90% of the shares is acquired the fair value in excess of the nominal value of shares issued must be recognised within the share premium.
- Recognition of the merger relief reserve means a capital reduction cannot be made against this reserve but this can be resolved.
An area not necessarily at the forefront of every tax adviser’s mind when designing company restructure transactions is how the proposals will impact the accounts of the companies subject to the restructuring.
While it may be easy to consider this the remit of the company’s accountant (if different) the commercial impact on the accounts should not be overlooked because in...
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