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GLOSSARY

Scrip issue definition

Published by a LexisNexis Corporate expert

What does Scrip issue mean?

See bonus issue or capitalisation issue.

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Tax consequences of share buybacks—calculating the income capital split

Tax consequences of share buybacks—calculating the income capital split From a shareholder’s perspective, when a company buys back its own shares, either directly or through an intermediary acting as agent for the company (whether on- or off-market), the purchase normally involves two elements for tax purposes: • an income distribution by the company to the shareholder to the extent the buyback proceeds exceed the amount the shareholder originally subscribed for the shares, and • a disposal of shares by the shareholder for chargeable gains purposes, with the disposal proceeds being the amount of cash received less any amount chargeable to income or corporation tax In order to be able to calculate precisely how a shareholder will be taxed on a share buyback, it is therefore necessary to determine how much of the amount paid is treated as an income distribution. Note that this calculation is complicated where there have been prior bonus issues of shares by the company (for more on this, see below). This Practice...

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Does a bonus issue have to be carried out so that the shares are offered to all existing shareholders in a company or can a company choose which shareholders to allot bonus shares to?

Does a bonus issue have to be carried out so that the shares are offered to all existing shareholders in a company or can a company choose which shareholders to allot bonus shares to? In this Q&A, we have assumed that the company proposing to carry out a bonus issue is a private company limited by shares. A bonus issue is the allotment of shares by a company to its existing shareholders, usually on the basis that they are fully-paid (as that is often a requirement of its articles of association), and without any payment being required by shareholders for those shares. In essence, a bonus issue will involve a resolution of a company to effect the capitalisation of existing reserves into (normally) fully-paid shares by allotting the shares and applying reserves in paying them up. It is not possible for a shareholder in a company that is making a bonus issue to refuse the allotment of any shares that they are entitled to or to...

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