Company reconstructions or amalgamations: position where shares issued before 17 April 2002
Before Sch 5AA there was no statutory definition of a reconstruction or amalgamation. For relief to be available, any scheme had to fall within the terms of Section 136 and/or Section 139 and, where appropriate, SP5/85.
TCGA92/S136(2) and TCGA92/S139(9) defined scheme of reconstruction as `a scheme for the reconstruction of any company or companies or the amalgamation of any 2 or more companies’. A reconstruction involves the transfer of a company’s business or undertaking to another company consisting of substantially the same shareholders. An amalgamation involves the blending of two or more existing undertakings into one undertaking. The shareholders in the company with the merged undertaking should be substantially the same as the shareholders in the original companies. An amalgamation could be effected by transferring two or more undertakings to a new company or by transferring one or more undertakings to an existing company.
TCGA92/s136 in order to be a scheme of reconstruction or amalgamation, a scheme must involve the transfer of a company’s business or undertaking. Where the transfer consisted not of an actual business, but instead of shares in a trading company, the holding company’s investment in those shares was taken to be its business (or part of its business) where it held 75% or more of the shares in the subsidiary company in question.
TCGA92/S136 relation to TCGA92/S139
There are certain situations (see, for example, at CG52725) where TCGA92/S136 will apply without there being any transfer of a business under Section 139. Before FA 2002, there were also situations where a business would be transferred under Section 139 without there being any share issue under Section 136 (see CG52831).
This is no longer possible.