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Income Tax Act 2007

Memorandum accounts - General provisions - Amalgamation of companies in consolidated groups

OA 14: Continuity of shareholding when group companies amalgamate

You could also call this:

“Rules for keeping track of ownership when companies in a group join together”

When all the companies in a consolidated group or consolidated imputation group join together, it’s called an amalgamation. This can also include a company that’s not part of the group. The amalgamation ends the group’s existence and forms a new company.

For the new company’s financial records, any credits or debits that were in the group’s records before the amalgamation are treated as if they were in the new company’s records from the start. This helps keep track of the money.

When checking if the same people still own shares after the amalgamation, you treat the new company as if it were the old group. This means you pretend the new company didn’t exist separately before and that it had the same shareholders and people with options to buy shares as the old group did.

There are rules to stop people from trying to cheat the system. These rules still apply to the group’s financial records, but they might be changed a bit to fit this situation.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1518680.

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Money and consumer rights > Taxes
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OA 13: Policyholder credit account on resident’s restricted amalgamation, or

“This rule about combining policyholder credit accounts when companies merge was removed in 2017”

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OA 15: When credits or debits due to consolidated group but not recorded, or

“How unrecorded financial items are handled when companies merge”

Part O Memorandum accounts
General provisions: Amalgamation of companies in consolidated groups

OA 14Continuity of shareholding when group companies amalgamate

  1. This section and section OA 15 apply when all the companies in a consolidated group or consolidated imputation group amalgamate on a resident’s restricted amalgamation, and the amalgamation results in—

  2. the end of the group’s existence; and
    1. the formation of an amalgamated company.

      1. The amalgamation may include a company that is not part of the consolidated group or consolidated imputation group.

      2. Subsections (4) and (5) apply for the purposes of determining whether a credit or debit arises in the memorandum account of the amalgamated company that is of the type referred to in section OA 2(1)(a), (b), (d), and (f).

      3. A credit or debit recorded in the memorandum account of the consolidated group before the date of the amalgamation is treated as if it were recorded in the same type of account of the amalgamated company on the date it was recorded in the consolidated group’s account with effect from the date of amalgamation.

      4. For the purposes of section OA 8(7)(b) and (8), in determining at a time after the amalgamation whether continuity of shareholding exists for the credit or debit in the memorandum account, the amalgamated company is treated for all times before the amalgamation as if—

      5. it did not separately exist; and
        1. it were instead the consolidated group, with the same shareholders and option holders.

          1. For the purposes of determining the credits and debits in the memorandum account of a consolidated group, sections GB 34 and GB 41 (which relate to arrangements to defeat the application of certain provisions) apply, modified as necessary.

          Compare
          Notes
          • Section OA 14(1): amended, on , by section 184(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
          • Section OA 14(6): amended, on (applying for income years beginning on or after that date), by section 88(1) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).