![]() Any excess over the nominal value of the shares issued is recorded in the share premium account. When a company issues shares, the basic rule contained in section 610 of the Companies Act 2006 is that those shares should be accounted for at the value of consideration received in exchange. Each can only be used where the relevant criteria are met. Merger accounting is a method of accounting for a business combination. Merger relief is a Companies Act relief from recording share premium. Although both include the word ‘merger’ in their names, and both commonly arise in group reconstructions, this is really where the similarities end. In such situations, confusion often arises over the use of merger relief and merger accounting. Shareholders give their shares in the old TopCo to NewCo in exchange for shares in NewCo. A common example of this is where a new holding company is put on top of an existing group. Chris Turner explores the differences between ‘merger relief’ and ‘merger accounting’ in the context of a share for share exchange.Ī share for share exchange is where one or more shareholders exchange shares they hold in one company for shares in another company. ![]()
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