Taxation of Chargeable Gains Act 1992 section 126

Application of sections 127 to 131

Section 126 defines what constitutes a "reorganisation" of a company's share capital and sets out the key terms used in the share reorganisation rules of sections 127 to 131.

• A reorganisation includes any restructuring or reduction of a company's share capital, such as bonus issues, rights issues, and certain capital reductions, where shareholders receive new shares or debentures in proportion to their existing holdings.
• The "original shares" are the shares held before the reorganisation, and the "new holding" is whatever shares and debentures the shareholder ends up with as a result, including any of the original shares that remain.
• A reorganisation also covers cases where a company has more than one class of share and the rights attached to any class are altered.
• The paying off of redeemable share capital does not count as a reduction of share capital; instead, a redemption of shares (other than by issuing new shares or debentures, and other than in a liquidation) is treated as a disposal by the shareholder at the time of redemption.