Provision where there is an exchange of shares or securities in the same company
7.—(1) In relation to any case described in regulation 4 the following paragraphs have effect.
(2) For the purposes of subsection (2)(b) to (d) of section 842AA(1), the aggregate value of the new shares and new securities shall be determined, immediately after the exchange and until such time as those shares or securities fall to be revalued in accordance with subsection (5) of that section, in accordance with the following formula:
where—
Nv is the aggregate value of the new shares and new securities to be determined in accordance with this paragraph,
Ov is the aggregate value of the old shares and old securities when last valued in accordance with subsection (5) of section 842AA (“historic values”),
Nmv is the aggregate market value, immediately after the exchange, of the new shares and new securities,
C is the aggregate market value, immediately after the exchange, of—
(i)any monetary amount,
(ii)any monetary right (without any discount for postponement of the right to receive the payment or any part of it), and
(iii)any other consideration or receipt (except the new shares and new securities),
received by the venture capital trust as consideration for, or in respect of, the old shares or old securities, and
“immediately after the exchange” in this regulation means immediately after the events mentioned in regulation 4(1)(d).
(3) For the purposes of subsection (2)(b) to (d) of section 842AA, where the venture capital trust retains original shares or securities in the company which are not included in the exchange of old shares or old securities for new shares or new securities, such original shares or securities shall, immediately after the exchange, continue to be valued at their value, or apportioned value, as the case may be, when last valued before the exchange in accordance with subsection (5) of section 842AA, until such time as they fall to be revalued in accordance with that subsection.
(4) For the purposes of paragraph 10B(2) of Schedule 28B the like provisions as are contained in paragraphs (2) and (3) shall apply (substituting references to valuations in accordance with paragraph 10B for references to valuations in accordance with subsection (5) of section 842AA).
(5) Where the company in which the venture capital trust holds the old shares or old securities is deemed to satisfy the requirements of paragraph 2 of Schedule 28B (unquoted company) by virtue of sub-paragraph (6) of that paragraph for a period of five years after ceasing to be an unquoted company, the company shall be deemed to satisfy those requirements in relation to the new shares or new securities for the same five year period.
(6) Subject to paragraph (7), where the old shares or old securities are shares or securities in relation to which the requirements of paragraphs 6 and 8(3) of Schedule 28B were (or were deemed to be satisfied to any extent immediately before the exchange, those requirements shall be deemed, at all times after that time, to be satisfied to the same extent in relation to the matching new shares or new securities.
(7) Where there is a time following the exchange when (apart from the exchange) the requirements of paragraph 6 of Schedule 28B would have ceased under—
(a)sub-paragraph (2) of that paragraph, or
(b)this paragraph,
to be satisfied in relation to the old shares or old securities, those requirements shall cease at that time to be satisfied in relation to the matching new shares or new securities.
(8) For the purposes of paragraph 7 of Schedule 28B any new shares or new securities shall be deemed—
(a)to have been issued at the time when the matching old shares or old securities were issued (or, as the case may be, were deemed to have been issued), and
(b)by virtue of that issue, to have raised the same amount of money as was raised (or, as the case may be, was deemed to be raised) by virtue of the issue of the matching old shares or old securities.
(9) In determining whether the requirements of paragraph 9(4) of Schedule 28B are satisfied in relation to the company at any time in the period for giving effect to the exchange, the exchange shall be disregarded.
(10) The reference in paragraph (9) to the period for giving effect to the exchange is to the period which—
(a)begins on the day when a shareholder disposes of, redeems or otherwise ceases to possess shares or securities in consequence of the exchange or, where there is more than one exchange of shares or securities involved in a company reorganisation, the exchanges, and is the first shareholder to do so, and
(b)ends on the earlier of—
(i)the date when the last of the shares or securities to be issued in consequence of the exchange or exchanges is issued, and
(ii)the day six months after the date in sub-paragraph (a) (or such later date as the Board may by notice in writing allow).
Section 842AA was inserted by section 70(1) of the Finance Act 1995 (c. 4) and amended by paragraph 7 of Schedule 38 to the Finance Act 1996 (c. 8), section 75 of the Finance Act 1997 (c. 16), section 73 of the Finance Act 1998 (c. 36), section 69(4) of the Finance Act 1999 (c. 16) and paragraph 8(2) of Schedule 18 to the Finance Act 2000 (c. 17).
Paragraph 10B of Schedule 28B was inserted by section 72(2) of the Finance Act 1998.
Paragraph 6 of Schedule 28B was amended by paragraph 4 of Schedule 9 to the Finance Act 1997 and section 73(4) of the Finance Act 1998.
Paragraph 9 of Schedule 28B was amended by section 161(2) of, and Part V(22) of Schedule 41 to, the Finance Act 1996.