Is the purchase of ESOP shares a distribution at law?
C5. No. The note of legal considerations attached to Abstract 38, reproduced as an Appendix to this [draft] guidance, makes it clear that the acquisition of shares by an ESOP trust does not give rise to a distribution. This is because at law the shares have been purchased by the trust, notwithstanding that assistance may have been given by the company (by way of gift or loan, some or all of which may be ultimately irrecoverable, or by guarantee of the trust’s borrowings that may ultimately be called upon to some extent). (For regulation of the transaction for a public company as financial assistance under the Companies Act 1985, see Question 5.) 5 Q2: Is the purchase of ESOP shares an immediate realised loss (thus affecting distributable profits under section 263)? C6. No. The note of legal considerations attached to Abstract 38 makes it clear that the acquisition of shares by an ESOP trust does not, of itself, give rise to a realised loss. Therefore, such an acquisition does not reduc
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