How we helped effect a share for share exchange re-organisation in under 4 hours - Jonathan Lea Network
Author: Callum Ritchie | Corporate Solicitor
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How we helped effect a share for share exchange re-organisation in under 4 hours

At the end of 2019, the shareholders of an innovative start-up, who have aims at reducing water wastage in the leather industry, called The Jonathan Lea Network late afternoon, after reading one of our blogs, seeking our assistance with a share for share exchange that needed to be completed by the end of the day.

They mentioned that they were originally a client of a large city law firm after instructing them on the acquisition of a business unit, however the firm had neither the expertise nor the capacity to assist them at such short notice.

Purpose for the share for share exchange

The shareholders intentions were to ring fence the liabilities of the loan they had taken out in the trading company to finance the acquisition of the business unit lease, which meant that the shareholders in the trading company required shares in the new holding company which would be used as a clean vehicle to raise further equity finance for the group.

After finding out the background behind the reorganisation, the team here at The Jonathan Lea Network began outlining the procedure behind a share for share exchange, the documents involved and how we can help. The shareholders quickly wished to progress things and together the team here began producing the relevant documentation to effect the share for share exchange.

Once instructed, the work was spread around the team to enable completion of the reorganisation to occur as swiftly as possible and within the short timeframe at hand.

Review of Constitutional Documents

Before we could begin producing the relevant documentation, as with any share for share exchange we had to review each company’s constitution in detail to check whether there were any restrictions on either company proceeding with the reorganisation.

This involved checking the articles of association and shareholder agreements of both companies for any clauses or rights the shareholders had, as well as whether there was a specific procedure that should be followed for both the reorganisation and for seeking authorisation.

Share for share exchange agreement

Once the team completed a review of the constitutional documents of both companies involved and noted down the relevant restrictions, work began apace at drafting the main document that ultimately governs the entire transaction – the share for share exchange agreement (more commonly referred to as an agreement for the exchange of shares).

The key aspects of the transaction, as included in this agreement, were to highlight that the consideration for the shareholders in the target company was for consideration shares in the holding company (hence the share for share exchange), as well as lay out the ancillary documents required to be completed in order for the transaction to be effected (including the procedure for completion to successfully occur).

In addition, as two shareholders in the trading company’s wives were the founding shareholders in the holding company, the amount of shares needing to be issued to the shareholders of the target company who had partners in the holding company had to be balanced accordingly. This meant no shareholder was reducing or increasing their percentage holding in the group.

As part of completion, we structured the agreement so that subdivision occurred before any shares were issued in the holding company enabling the parties involved to more easily understand the “end result” and the procedure being followed to get to that position.

Given the tight timescales, it was important that the procedure was followed correctly and the relevant filings were subsequently made at Companies House in a timely fashion.

Board Minutes for each Company

Both the target company and the holding company required board minutes as evidence that the directors had considered and approved the transaction for the benefit of the companies as a whole.

It is increasingly important that such transactions are considered by the directors in the form of board minutes and/or resolutions before proceeding, to ensure that each director has written evidence showing that their statutory duties as a director have been satisfied.

Shareholder Resolutions

In light of the team’s review of the company’s constitutions, resolutions were required to be drafted and signed by the shareholders of each company disapplying pre-emption rights (for the transfer of shares in the target company and for the issue of new shares in the holding company) enabling the shares to be transferred and issued without any unnecessary delay, as well as a resolution authorising the subdivision of the holding company’s share capital.

Post-Completion Documents

Once all of the relevant documents had been signed, in order for each party to have legal evidence that they owned their respective shares both share certificates and stock transfer forms were prepared.

For the purposes of expediency all of these documents were sent to our client at the same time as the main transactional documents to enable the execution and signing of all documents in one go.

Companies House Filings

We also filed various forms at Companies House on behalf of both companies including:

  • Shareholder Resolutions – As the disapplication of pre-emption rights had to be in the form of a special resolution for each company, the signed resolutions were sent off to Companies House accordingly;
  • PSC Forms – A PSC02 form had to be filed on behalf of the target company highlighting that the holding company is the new owner of all of its shares. Other PSC forms that had to be filed highlighting the correct persons of significant control included PSC07 forms (ceasing of an individual person with significant control) and a PSC01 form (notice of an individual person with significant control);
  • SH01 form (statement of capital form) – Evidencing the number of shares being issued to the target shareholders in the holding company;
  • SH02 form (notice of sub-division of shares);
  • AP01 and TM01 forms (appointment and termination of directors) – These forms were filed on behalf of the holding company to ensure the directors of the target company were also the directors of the holding company.
  • CS01 forms (confirmation statements) – Lastly our client wanted us to prepare and file CS01 forms on behalf of each company as a matter of completeness and clarity for anybody who delved into their public records.

Tax Clearance Letter

Ordinarily we would always advise our clients to apply for tax clearance with HMRC before any share for share exchange is implemented, so as to prevent the possibility of any unnecessary tax charges (such as capital gains tax arising when shareholders swap shares in two companies and income tax liability). Receiving clearance from HMRC then provides parties with “tax clarity” and the impetus to proceed with the exchange.

However, in light of the time pressures involved our client was willing to proceed on the basis of a short advisory note from one of our specialist tax consultant solicitors with no tax clearance letter being submitted.

As we continue to grow, share for share exchange transactions are becoming a growing niche of our central office team here and, with expert tax consultants also on hand to assist you throughout, we will be able to offer a complete service whatever your needs.


If you are looking for advice or legal assistance as you consider undergoing a share for share exchange (regardless of how time-pressing it is), please email our We Will Help email address at and we will get in touch to set up a 20-minute no-cost, no-obligation call with one of the fee earners here to understand your situation further.



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