633C Treatment of securities on a merger

Summary

This section sets out rules for the treatment of shareholders where an SE or an SCE is formed by a merger. If the shareholders are not already entitled to relief because the merger is a reconstruction or amalgamation within the meaning of section 587, then the merger is to be treated as if it was a scheme of reconstruction so that relief would be available. Where the shareholders in a reconstruction or amalgamation surrender shares in one company for shares in another, then no disposal is treated as having taken place and the new and old shares are treated as the same asset.

Details

Application

(1) This section applies where the following criteria are met:

• (1)(a) an SE or SCE is formed by a merger in accordance with the SE or SCE Regulation;
• (1)(b) each merging company is resident in a Member State;
• (1)(c) the merging companies are not all resident in the same Member States (thus it must be a cross-border merger); and
• (1)(d) the merger is not part of a scheme of reconstruction within the meaning of section 587..

Treatment of shareholders – scheme of reconstruction

(2) Where the section applies the merger is to be treated as a scheme of reconstruction for the purposes of section 587. That section provides that, in the case of a scheme of reconstruction where shareholders in a company receive shares in another company in proportion to their holding in the first company, they are to be treated as exchanging the old shares for the new shares and section 586(1) is to apply. Section 586(1) provides that the two companies are to be treated as one and section 584 is to apply. That section provides that the transaction is to be treated as not involving a disposal of the old shares, but the old shares and the new shares are to be treated as a single asset.

Relevant Date: Finance Act 2021