Over the course of the next few weeks, we will share a four part series of short articles on re-organisations that are often availed of in Ireland.
There are tax efficient re-organisations that are referred to as ‘share for share’ exchanges or ‘share for undertaking’ swaps, which can provide exemption from Stamp Duty (SD).
Part One – Share for Share Exchange:
A share for share exchange involves the issue by the acquiring company of shares to the shareholders of an existing company in exchange for their shares in the existing company creating a group structure.
In a share for share exchange, the consideration shares must be issued by the acquiring company in exchange for the shares in the existing company.
There are certain conditions that must be met, as set out under section 80 of the Stamp Duties Consolidation Act, 1999. One of these conditions is that the scheme must be affected for bona fide commercial reasons and not as part of a scheme or arrangement the main purpose of which is tax avoidance
In order to be exempt from SD, the acquiring company must acquire 90% or more in nominal value of the issued share capital of the existing company.
There is a claw back of SD where the acquiring company ceases within two years from the date of incorporation of the acquiring company or the authorisation date to increase its share capital (as the case may be) to be the beneficial owner of the shares in the existing company (i.e. the target company), unless it is as a result of a further reconstruction, amalgamation or liquidation.
The share for share exchange creates a holding company structure and allows companies to create new subsidiaries under the acquiring company which provides flexibility in relation to intercompany loans and distributions.
Please contact Conor Mullany, Elaine Keane or Conor Mullins of MWM for more information.
This article is for general information purposes only. Legal advice must be obtained in each individual circumstance. Whilst every effort has been made to ensure the accuracy of this article, no liability is accepted by the author for any inaccuracies.
Please note that MWM are not tax advisors and do not provide any tax advice.
