Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Recharacterisation of certain transactions - Amalgamation of companies

FO 15: Financial arrangements: amalgamation other than resident’s restricted amalgamation

You could also call this:

“Rules for financial agreements when companies merge, except for specific resident mergers”

When a company joins with another company, and it’s not a special kind of joining called a resident’s restricted amalgamation, this law explains what happens to the money-related agreements, called financial arrangements, that the joining company had.

If you’re the company that’s joining, the law says you’re treated as if you sold or got rid of your financial arrangements just before you join. The price for this is what someone would pay to take over those agreements at that time.

If you’re the new company that’s formed after the joining, the law says you’re treated as if you bought or took on those financial arrangements right after the joining happened. The price for this is what the property involved in those agreements is worth at that time.

This helps to make sure that the financial arrangements are properly accounted for when companies join together.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1516811.

Topics:
Money and consumer rights > Taxes
Business > Industry rules
Previous

FO 14: Financial arrangements: resident’s restricted amalgamation, other cases, or

“Rules for financial deals when companies merge in specific ways”

Next

FO 16: Amortising property, or

“Rules for handling special property when companies merge”

Part F Recharacterisation of certain transactions
Amalgamation of companies

FO 15Financial arrangements: amalgamation other than resident’s restricted amalgamation

  1. This section applies when an obligation that an amalgamating company has in relation to a financial arrangement passes to the amalgamated company on an amalgamation that is not a resident’s restricted amalgamation.

  2. The amalgamating company is treated as having disposed of the financial arrangement or relieved itself of the obligations immediately before the amalgamation. The consideration for the disposal is the market price for assuming the obligations at the time of the amalgamation.

  3. The amalgamated company is treated as having acquired the financial arrangement or assumed the obligations immediately after the amalgamation. The consideration for the acquisition is the market value of the property at the time of the amalgamation.

Compare