Practice analysis: return of value to shareholders: reorganisations to create distributable reserves

This table contains details of reorganisations by listed companies principally aimed at increasing distributable reserves, announced in 2007. For details of more recent reorganisations and for fuller details of the issues covered in the table below, see PLC What's Market.

Under section 830(1), Companies Act 2006 a company may only make a distribution out of profits available for the purpose as determined in accordance with section 830(2) (see further Practice note, Distributions). One method used to create distributable reserves is to insert a new holding company (Holdco) above the existing listed company using a scheme of arrangement under Part 26, Companies Act 2006. The shareholders of the listed company receive shares in Holdco and their existing shares are cancelled. The company then issues new shares to Holdco which becomes the holding company of the group and whose shares are admitted to listing. This is followed by a reduction in the nominal value of the Holdco shares creating a reserve that can be used for future dividends and share buybacks.

Most of the structures outlined in this table involved shareholders receving new shares in Holdco in consideration for the cancellation of their shares in the existing company but in one case shareholders received cash and in another B shares. So this type of restructuring can be coupled with a return of cash.
PLC Corporate


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