Underwriting of shares: contents
This section deals with the taxation of those underwriting an issue of shares.
In this section ‘shares’ should be read as including stocks and securities and ‘underwriting’ as including sub-underwriting.
When a company decides to issue shares to the public, it may decide to enter a contract with an underwriter. Under such an arrangement the underwriter will agree to take those shares which are not otherwise subscribed.
In exchange for this service the underwriter is paid a commission, which is usually a fixed percentage of the total offer price of the shares.