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HMRC internal manual

Employee Tax Advantaged Share Scheme User Manual

HM Revenue & Customs
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Enterprise Management Incentives (EMI): Company reorganisations: Meaning of qualifying exchange of shares

There is a qualifying exchange of shares if a new company obtains all the shares in the EMI company (the old company) and the following conditions are met:

  • the consideration for the shares in the old company consists wholly of the issue of shares in the new company,
  • the new shares are issued when the new shares and subscriber shares are the only shares issued in the new company,
  • the consideration for new shares of each description consists wholly of old shares of a corresponding description,
  • new shares of each description are issued to holders of old shares of the corresponding description in proportion to their holdings, and
  • the exchange of shares is not treated as involving a disposal of the old shares or an acquisition of the new shares under section 127 Taxation of Chargeable Gains Act 1992.

Shares are of corresponding description if, were they in the same company, they would be of the same class and carry the same rights, (Paragraph 40).