Companies Act: share capital and restructuring pitfalls - part 3

In part three of our series on share capital and the Companies Act 2006, Anne Cowley ACA gives a snapshot of some of the key opportunities and potential pitfalls for companies considering changing their corporate structure

Should I apply merger relief?

Merger relief under section 612 of the Companies Act (CA 2006) is not an option; if the conditions are satisfied then any premium on the issue of shares shall not be taken to the share premium account. The question should more correctly be ‘Should I apply the provisions of s615 not to record any premium in a merger reserve in respect of the shares issued and correspondingly record the investment at a lower amount?’.

The advantage of recording the shares issued at their nominal amount is simplicity. There is no need to consider the fair value of the investment acquired.

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Should I apply merger relief?

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