The Venture Capital Trust (Exchange of Shares and Securities) Regulations 2002

Provision where exchange of shares or securities for those in another company

8.—(1) In relation to a case described in regulation 5, the following paragraphs have effect.

(2) For the purposes of subsection (2)(b) to (d) of section 842AA, the aggregate value of the new shares and new securities issued to the venture capital trust 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 formula in regulation 7(2) (substituting references to the period for giving effect to the exchange for references to the events mentioned in regulation 4(1)(d)).

(3) For the purposes of paragraph 10B of Schedule 28B, the like provisions as are contained in paragraph (2) shall apply (substituting references to valuations in accordance with paragraph 10B for references to valuations in accordance with subsection (5) of section 842AA).

(4) The new shares and new securities held by the venture capital trust shall be treated, during the period for giving effect to the exchange, as meeting the requirements of Schedule 28B.

(5) The requirements of and arrangements referred to in paragraph 9 of Schedule 28B, to the extent that they are incidental to the exchange, shall be disregarded before and during that period.

(6) The new shares and new securities shall be treated at all times following the end of the period for giving effect to the exchange as having met the requirements of paragraphs 6 and 7 of Schedule 28B.

(7) Where, immediately after the end of the period for giving effect to the exchange, any of the new shares or new securities are found not to meet the requirements of paragraph 2 of Schedule 28B, or of that paragraph and any other paragraphs of that Schedule (other than paragraph 6 or 7), those shares or securities shall be treated as meeting those requirements until the end of the period specified in paragraph (8) or the disposal by the venture capital trust of those shares or securities, whichever is the earlier to occur.

(8) The period specified is the period that—

(a) begins on the date when new shares or new securities are first issued to the venture capital trust or, if later, on the date on which all the new shares or new securities issued to the venture capital trust become fully tradeable, and

(b) ends immediately before the second anniversary of that date.

(9) Where, immediately after the end of the period for giving effect to the exchange, any of the new shares or new securities are found not to meet the requirements of any paragraph of Schedule 28B other than paragraph 2, 6 or 7, those shares or securities shall be treated as meeting those requirements until the end of the period—

(a) beginning on the date when new shares or new securities are first issued to the venture capital trust (“the first issue date”), and

(b) ending on the earlier of—

(i) the disposal by the venture capital trust of those shares or securities, or

(ii) subject to paragraph (10), in the case of shares, the day 3 years after the first issue date and, in the case of securities, the day 5 years after the first issue date.

(10) Where, in a case falling within the terms of paragraph (9)(b)(ii), before the relevant date there mentioned, the new shares or new securities become marketed to the general public (within the meaning of paragraph 2(3) of Schedule 28B), there shall be substituted for that date the second anniversary of the date on which the new shares or new securities became so marketed or, if later, the second anniversary of the date on which those shares or securities became fully tradeable.

(11) References in this regulation to the period for giving effect to the exchange are references to the period which—

(a) begins when a shareholder or holder of securities ceases to possess shares in or securities of company A in consequence of the exchange, and is the first shareholder or holder of securities to do so, and

(b) ends when the last of the shares in or securities of company B to be issued in consequence of the exchange (excluding shares or securities issued in pursuance of an earn-out right) is issued.

(12) Shares or securities become fully tradeable for the purposes of this regulation and regulation 9 when, in circumstances where they are offered for issue to the shareholders or holders of securities of company A, they cease to be subject to—

(a) rules of the recognised stock exchange (or other exchange) governing the offer that prohibit or restrict the disposal of the shares or securities to any other person, and

(b) conditions prohibiting or restricting the disposal of the shares or securities to any other person that are contained in any contract entered into by any of the following persons—

(i) company B, or a company disposing of the shares or securities,

(ii) the person or persons sponsoring, underwriting or organising the offer, and

(iii) the venture capital trust in question.