Taxes Consolidation Act 1997 section 587

Company reconstructions and amalgamations

Section 587 provides relief from capital gains tax where, under a scheme of reconstruction or amalgamation, a company issues shares to the shareholders of another company in proportion to their existing holdings.

• Where a company issues shares to the shareholders of another company under a scheme of reconstruction or amalgamation, in proportion to their existing holdings, the transaction is treated as an exchange of shares and no capital gains tax arises at the time of the exchange.
• A reconstruction preserves an existing business by transferring it to another company with substantially the same shareholders; an amalgamation blends two or more businesses into one, with the shareholders of each becoming shareholders of the combined entity.
• The relief applies only where the reconstruction or amalgamation is carried out for bona fide commercial reasons and is not part of a tax avoidance scheme, and does not apply where the issuing company is an investment undertaking within the meaning of section 739B.
• Since 4 December 2002, the relief does not extend to the issue of debentures, loan stock or similar securities unless issued under a pre-existing binding written agreement, between members of the same group, or under a scheme previously acknowledged by Revenue.