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HMRC internal manual

Capital Gains Manual

Reorganisations of share capital: vendor placings

A rights issue will generally be a reorganisation of share capital as will an open offer, at least to some extent. By contrast an issue of shares in a vendor placing is not treated as a reorganisation of share capital. In a vendor placing a company wishes to pay for the purchase of an asset, often shares in another company, by issuing its own shares. But the vendors do not want the shares. Therefore, the issuing company makes arrangements to sell the shares on the vendors’ behalf. The issuing company may offer the shares to its existing members subject to a minimum and possibly maximum entitlement in a clawback arrangement similar to that described in CG51756. Any unwanted shares are placed with institutions. No part of any acquisition by existing shareholders can be treated as a share reorganisation because the shares have already been allotted to the vendors.