Part 6U.K.Venture capital trusts

Chapter 6U.K.Supplementary and general

Conversion of shares etc and company reorganisationsU.K.

329Conversion of convertible shares and securitiesU.K.

(1)This section applies if—

(a)shares have been issued to a company (“the investing company”) by the exercise by it of any right of conversion attached to other shares or securities held by it (“the convertibles”),

(b)the shares so issued are in the same company as the convertibles to which the right was attached,

(c)the convertibles to which the right was attached were first issued to the investing company and were held by it from the time they were issued until converted, and

(d)the right was attached to the convertibles when they were first so issued and was not varied before it was exercised.

(2)If this section applies, subsections (3) and (4) have effect to determine the extent to which, and the times for which, the requirements of the following provisions of Chapter 4 are met in relation to the shares issued to the investing company by the exercise by it of the right of conversion—

  • section 287 (the maximum qualifying investment requirement),

  • section 289 (the proportion of eligible shares requirement),

  • section 291 (the carrying on of a qualifying activity requirement),

  • section 293 (the use of the money raised requirement),

  • section 294 (the relevant company to carry on the relevant qualifying activity requirement), and

  • section 297 (the gross assets requirement).

(3)Subsections (3) to (6) of section 327 apply in relation to the exchange of convertibles for shares by virtue of the exercise of the right of conversion as if—

(a)that exchange were an exchange, under any arrangements to which that section applies, of new shares for old shares, and

(b)the references in those subsections and section 328(5)(b) to the arrangements were references to the provision conferring the right of conversion.

(4)For the purposes of section 289 the value of the new shares immediately after the time of their acquisition by the investing company is to be taken as the same as the value, when last valued in accordance with that section, of the convertibles for which they are exchanged.

330Power to facilitate company reorganisations etc involving exchange of sharesU.K.

(1)The Treasury may by regulations make provision for cases where—

(a)a holding of shares or securities that meets the requirements of Chapter 4 is exchanged for other shares or securities,

(b)the exchange is made for genuine commercial reasons and does not form part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax, and

(c)the new shares or securities do not meet some or all of the requirements of Chapter 4,

providing that the new shares or securities are to be treated as meeting those requirements.

[F1(1A)The Treasury may by regulations make provision for the purposes of this Part for cases where—

(a)a holding of shares or securities that does not meet the requirements of Chapter 4 is exchanged for other shares or securities not meeting those requirements, and

(b)the exchange is made for genuine commercial reasons and does not form part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.]

(2)The references in [F2subsections (1) and (1A)] to an exchange of shares or securities include any form of company reorganisation or other arrangement which involves a holder of shares in or securities of a company receiving other shares or securities—

(a)whether the original shares or securities are transferred, cancelled or retained, and

(b)whether the new shares or securities are in or of the same or another company.

(3)[F3Regulations under subsection (1)] must specify—

(a)the cases in which, and conditions subject to which, they apply,

(b)which requirements of Chapter 4 are to be treated as met, and

(c)the period for which those requirements are to be treated as met.

[F4(3A)Regulations under subsection (1A) may, among other things, make provision—

(a)for the new shares or securities to be treated in any respect in the same way as the original shares and securities for any period;

(b)as to when the new shares or securities are to be regarded as having been acquired;

(c)as to the valuation of the original or the new shares or securities.]

(4)[F5Regulations under this section] may contain such administrative provisions (including provision for advance clearances) as appear to the Treasury to be necessary or appropriate.

F6(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6)Regulations under this section —

(a)may make different provision for different cases,

(b)may contain incidental, supplemental, consequential and transitional provision and savings, and

(c)[F7in the case of regulations under subsection (1)] may include provision having retrospective effect.

Textual Amendments

F2Words in s. 330(2) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), s. 13(3)

F3Words in s. 330(3) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), s. 13(4)

F5Words in s. 330(4) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), s. 13(6)

F7Words in s. 330(6)(c) inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), s. 13(7)