Taxation of Chargeable Gains Act 1992 Schedule 5AA paragraph 2

First condition: issue of ordinary share capital

Section 2 of Schedule 5AA sets out the first condition that must be met for a scheme of reconstruction to qualify: the successor company must issue new ordinary shares exclusively to the existing ordinary shareholders of the original company.

• A successor company (or companies) must issue ordinary share capital to the holders of ordinary share capital of the original company (or companies) as part of the reconstruction scheme.
• Where the original company has different classes of ordinary shares, the scheme need only involve holders of one or more of those classes — these are the classes "involved in the scheme of reconstruction."
• The scheme may involve more than one original company and more than one successor company, but the same rules apply regarding the issuance of shares to existing ordinary shareholders.
• No ordinary share capital of the successor company (or any of the successor companies) may be issued to anyone other than the qualifying holders of ordinary shares in the original company or companies.