When do the share-for-share rules apply during a takeover?

The share-for-share rules apply during a takeover when the transaction is undertaken for bona fide commercial reasons rather than for the purpose of avoiding tax. These rules allow for certain transactions to occur without triggering immediate tax liabilities, as they are seen as part of normal business activities rather than simply tax avoidance schemes.

In the context of a takeover, this means that if the acquiring company (B) is purchasing shares in the target company (A) with genuine business intentions—such as expanding its operations, increasing market share, or achieving economies of scale—then these rules facilitate the exchange of shares without immediate tax consequences. This aligns with the principle of supporting genuine commercial transactions that drive business growth and economic activity.

The other alternatives don't align with the criteria set for the application of share-for-share rules. For instance, acquiring less than 25% of the outstanding shares does not constitute a takeover in the conventional sense that would engage these rules. Similarly, acquiring 100% of assets or a small private company does not inherently provide the necessary framework for the share-for-share relief; these transactions would need to fulfill the bona fide requirement to qualify for such relief under the rules.