Public takeovers—basic tax principles
Public takeovers—basic tax principles

The following Corporate practice note provides comprehensive and up to date legal information covering:

  • Public takeovers—basic tax principles
  • Typical public takeover structures
  • Involvement of offeree company
  • Taxation of offeree shareholders
  • Documentation

Typical public takeover structures

The structure of a public takeover and its tax consequences will depend on whether:

  1. the consideration offered for the offeree shares is:

    1. cash

    2. shares

    3. loan notes, or

    4. a combination of the above, and

  2. the offer is structured as:

    1. a contractual takeover offer, where the offeror makes an offer to the offeree shareholders to acquire their offeree shares in return for such consideration as the offeror offers (ie cash, shares and/or loan notes), or

    2. a transfer scheme of arrangement, where the offeree company enters into a court scheme to sanction:

      1. the offeree shareholders transferring their shares to the offeror, and

      2. the offeror paying the offeree shareholders in exchange such consideration as it offers (ie cash, shares and/or loan notes)

With effect from 4 March 2015 the use of capital reduction schemes of arrangement (ie cancellation schemes) to effect takeovers are prohibited. Transitional provisions ensure that a cancellation scheme can still be used for takeovers announced, or (in the case of transactions not subject to the Takeover Code) agreed, before the regulations came into force. A cancellation scheme is also a court approved scheme entered into by the offeree company, which involved:

  1. the cancellation of the offeree shares

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