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HMRC internal manual

Stamp Taxes on Shares Manual

Scope of stamp duty on shares: stamp duty: basics of a charge: company takeovers

A company (the acquiring company) offers to purchase the shares in another (the target company). The offer is often made by the financial institution acting for the acquiring company and details are published in an Offer Document. The consideration for the offer can be:

  • cash
  • shares
  • shares and cash
  • shares with a cash alternative

When the offer is made it is usually conditional on acceptance by the shareholders of the target in respect of a stated minimum percentage of shares by a given date, often with the proviso that the acquiring company may extend the closing date or decide to accept a lesser percentage. Where the consideration includes shares to be issued, the offer would normally also be conditional upon those shares being listed. The acquiring company may cancel the offer while these (and other) conditions remain unfulfilled. When the conditions are satisfied the company declares the offer unconditional.

Target company shareholders wishing to accept the offer must complete a form of acceptance. Completed acceptances received by (or on behalf of) the acquiring company on or before the date the offer is declared conditional are conditional contracts until that date.

Sections 979 to 981 of the Companies Act 2006 provide that where an acquiring company makes an offer for all the shares, or the whole of any class of shares, of another company and the offer is accepted by the holders of 90 per cent by value of the relevant shares, the acquiring company may, by notice, compulsorily acquire the remaining shares from the dissenting shareholders who did not accept the offer.

These transactions can generate documents that require stamping, generally in the form of block transfers. See STSM021190.

Any company takeover in the form described above attracts Stamp Duty at the standard rate.