Secondary buyouts—tax issues for management

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

  • Secondary buyouts—tax issues for management
  • What is a secondary buyout?
  • How do the management team participate in the secondary buyout?
  • Consideration provided to the management team
  • How are the managers taxed?
  • Disposal of shares in Target—income tax
  • Performance ratchets
  • When will a disposal of Target shares fall outside the income tax regime?
  • Restricted securities regime
  • Disposal of shares in Target—capital gains tax regime
  • More...

Secondary buyouts—tax issues for management

A secondary buyout (SBO) is broadly where a private equity firm buys a business that has previously been subject to a buyout. This Practice Note examines the tax issues arising for a UK management team when they dispose of interests in the target company and acquire interests in a UK acquisition company, as part of an SBO.

This note:

  1. explains how the managers participate in an SBO

  2. summarises the application of the income tax regime to a disposal

  3. explains when a disposal will not give rise to an income tax charge

  4. summarises the application of the capital gains tax regime to a disposal, and

  5. considers the tax treatment of shares and loan notes acquired in the acquisition vehicle

For a detailed analysis of the income tax issues arising for the management team on an SBO, see Practice Note: Secondary buyouts—income tax issues for the management team and for a detailed analysis of the capital gains tax issues arising for the management team on an SBO, see Practice Note: Secondary buyouts—capital gains tax issues for the management team.

For a summary of the tax issues affecting the acquisition group in a private equity-backed buyout, see Practice Note: Buyouts—tax issues for the acquisition group.

For background information on secondary buyouts, see Practice Note: Tax on secondary buyouts—background.

The tax issues covered in this sub-topic relate to

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