A share for undertaking swap involves the transfer of an undertaking by an existing company to the acquiring company, which then issues the consideration shares to the existing company (two party share for undertaking swap) or the transfer of an undertaking by an existing company to the acquiring company, which at the direction of the existing company, issues the consideration shares directly to the shareholders of the existing company (three party share for undertaking swap).
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, as with the share for share exchange, is that the scheme must be for bona fide commercial reasons and not as part of a scheme or arrangement, the main purpose of which is tax avoidance.
In the case of a two party share for undertaking swap, stamp duty relief will be lost if the target company ceases to be the beneficial owner of the shares issued to it by the acquiring company within two years other than in consequence of reconstruction, amalgamation or liquidation.
The share for undertaking swap allows companies to extract certain businesses into a new corporate structure. This is useful if there are trades being operated by the existing company that are very different.
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.
