What is a Share Exchange

Share Exchange

Learn what a share exchange is and why it's important.

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What is a Share Exchange?

A Share Exchange is a type of share transaction where the shares of one class are exchanged for shares of another class. Unlike a share conversion, shares are not simply converted from one class to another directly. Instead, shares of one class are transferred to treasury and shares of another class are issued from treasury to the holders.

Importantly, a share exchange itself does not require that all shares of a class be exchanged nor does it require that all shareholders of a class exchange their shares. It is also not a requirement of a share exchange that the same number of shares be issued as those that were disposed of to treasury.

If the shares received after an exchange are of lesser value than those disposed of to treasury, there may be tax implications.

Modern entity management software is designed make share exchanges easy to reflect in a database, document in documentation and record in corporate ledgers and registers.