D6.203 Scheme of reconstruction—qualifying conditions
The share reorganisation provisions (D6.101–D6.103) apply where certain arrangements between a company (company A) and its share or debenture-holders (or any class of them) are entered into for the purposes of, or in connection with, a scheme of reconstruction. Broadly, under the arrangement, another company (company B) must issue shares or debentures to those holders in respect of, or in proportion to (or as nearly as may be in proportion to), their original holdings, which latter are then retained, cancelled or otherwise extinguished.
For a scheme of reconstruction to fall within the share reorganisation rules, it must represent1:
(a) a 'scheme of reconstruction' (as defined below) that involves an arrangement between a company ('company A'), and:
(1) persons holding shares or debentures in the company, or
(2) where there are different classes of shares or debentures, the persons holding any class of those shares or debentures, and
(b) under the arrangement:
(1) another company ('company B') issues shares or debentures to the persons concerned, in proportion to their holdings of the shares in, or debentures of, company A (or in proportion to their holdings of the shares or debentures of the class in question), and
(2) the shares or debentures of company A are retained by those persons or are cancelled or otherwise extinguished.
The current definition replaced a more loosely worded definition which referred to a 'scheme of reconstruction or amalgamation'. The earlier definition applied to shares and debentures
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