Section 356 — Corporation Tax Act 2009: Exception to section 354: swapping debt for equity

Exception to section 354: swapping debt for equity 356 1 An impairment loss or release debit in relation to a liability to pay any amount to a company (“the creditor company”) under its creditor relationship is not prevented from being brought into account by section 354 if conditions A, B and C are met.

2 Condition A is that the creditor company treats the liability as discharged.

3 Condition B is that it does so in consideration of—

a any shares forming part of the ordinary share capital of the company on which the liability would otherwise have fallen, or b any entitlement to such shares.

4 Condition C is that there would be no connection between the two companies for the accounting period in which the consideration is given if the question whether there is such a connection were determined by reference only to times before the creditor company—

a acquired possession of the shares, or b acquired any entitlement to them.