The circumstances leading to the potential abuse in CTM15400 (bonus issue followed by a repayment of share capital) could occur in reverse.

A company could repay share capital and then make a bonus issue of shares. The shareholders would have received cash, but their holdings would be the same as before. Without special legislation, this would not give rise to a distribution.

To deal with such a situation CTA10/S1022 (1) (2) and (3) provide that:

where a company repays any share capital (other than certain preference shares, see CTM15430, and

at or after the time of the repayment the company makes a bonus issue of shares,

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