In such scenarios, both the FDI Regulation and the ODI rules apply, since the shares of an Indian company are transferred to a person established outside India and the acquisition of shares in a foreign company by an established Indian is done in this way. Therefore, share exchange agreements require compliance with the current FDI Regulation and the ODI Regulation. Note that, in the case of an all-stock deal, once the swap terms have been agreed, the target company`s share price varies approximately depending on the stock-to-swap ratio in value. For shareholders of the target company, the IRS also does not consider the initial investment to be a “divestiture” for tax purposes when the business is taken over. No profit or loss should be reported at the closing of the transaction. The cost base for shareholders of the merged entity will be the same as the initial investment. Fund A manager wants to replicate the returns of ABC Corp.`s shares without buying the company`s actual shares. In 2017, The Dow Chemical Company (“Dow”) and E.I. du Pont de Nemours & Company (“DuPont”) entered into a merger in which Dow shareholders obtained a swap ratio of 1.00 shares of DowDuPont (the combined company) for each Dow share, and DuPont shareholders obtained a swap ratio of 1.282 shares of DowDuPont for each DuPont share.
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