First Active First Active this week announced that it has agreed to be bought by Royal Bank of Scotland. What I want to know is whether I will have to surrender my shares as part of this deal?

Mr J.O'R., Dublin

The simple answer is Yes. The deal announced this week will, if approved, see Royal Bank of Scotland take over the Irish mortgage and savings back for a price equal to €6.20 per share.

However, there is no alternative to the cash offer for the company, such as shares in Royal Bank of Scotland.

There may be several reasons for this. First, companies tend to offer stock as part of a takeover when they either do not have the cash on hand to fund the deal and want to preserve some of their cash reserves for other developments.

Another consideration may be the sheer number of small shareholders in First Active. Small investors control more than 60 per cent of the company as a result of the free shares issued to members of the former First National Building Society when it went public in 1998. It may be unpalatable but the truth is that most public companies are not over-enamoured of the small investor.

They are generally more unpredictable than larger stakeholders, which are often institutions that companies interact with regularly. They are also more expensive to communicate with. Printing and sending out annual reports and other paperwork to 140,000 people with a few hundred shares is a cost a company lie Royal Bank of Scotland would not relish - to say nothing of the added cost to investor relations departments of processing dividend cheques and communications across national boundaries.

The shareholder profile at first Active is also behind the decision to structure the takeover through a scheme of arrangement. In a normal takeover, the acquiror would need to secure the support of people holding 80 per cent of the shares in order to acquire the rest - compulsorily if necessary. This time around, under the scheme of arrangement, Royal Bank of Scotland needs just the support of 75 per cent of those actually voting at the extraordinary general meeting - in person or by proxy.

So, if they succeed, you will have to sell your shares at the takeover price. having said that, the price on offer is a higher price than anything First Active has achieved in its five short years a s a public company and the fortune of its shareholders stands in stark contrast to the fate that befell Eircom investors when it was taken private.

I read that people with mortgages or deposits at First Active would benefit from the windfall as a result of the Royal Bank of Scotland takeover. I have a mortgage with the bank and have heard nothing from them on this. Is it true?

Ms S.B., email

I'm afraid not. The people who will benefit if this deal goes through are those who have had shares in First Active.

These include a large number of people who had mortgages and/or deposits with First National Building Society before it changed its name to First Active and floated on the stock exchange.

As a building society, such people were members and stakeholders in the business. When it changed status, their membership translated into shares - 450 each per qualifying account. So, if you had both a mortgage and a deposit account at FNBS, you got 900 shares.

That happened way back in 1998. People who have undertaken business with the bank since that transformation are merely customers not members.

Employee share profits

I have sent two emails to the Revenue Commissioners regarding my query without receiving any response or acknowledgment. I hope you can help. I read a notice recently that the deadline for payment of capital gains tax incurred this year has been brought forward to the end of October. In July 2003, I sold some shares that I had accumulated over the years. These shares were in a company for which I used to work. I am trying to calculate my tax liability using the inflation multipliers provided by the Revenue.

However, I am having difficulty figuring out the acquisition dates.

When I worked for my former employer, I was given the option each year to receive a portion of my compensation in the form of shares in the company. Under this scheme these shares were held in trust for three to five years after which I received a share certificate in my own name. This was done to eliminate my income tax liability on the value of the shares.

Does the acquisition date refer to the date on which the shares were first allocated to me and held in trust, or to the date on the share certificate which I would have received three to five years later? Obviously, if the earlier date is used my capital gains tax liability would be less. However, I would like to pay whatever is due so I would be grateful for your advice on the matter.

As a postscript, my tax is assessed jointly with my wife. Can you clarify if I am entitled to use the married couple's allowance of €2,540 in calculating the CGT due? The shares were in my name solely.

Mr J.B., email

There are so many employee share schemes floating around at the moment, each with their own rules, that I confess I was confused about which one you were involved in. But Mr Liam Reid at PricewaterhouseCoopers assures me the plan to which you refer is a profit-sharing scheme.

These worked by paying staff bonuses and the like in the form of shares. Employees of an approved profit-sharing scheme would be exempt from income tax on shares received from an employer provided they were held in trust for three years. Previously, the time period was five years.

If the shares were withdrawn from the trust in that period, income tax is chargeable on the value of the shares.

There are also upper limits on the amount an employee can receive each year through such a scheme.

They are, as you say, liable to capital gains tax, and the relevant date is the date on which they were first allocated to the employee and placed in the trust.

I am not sure you are right when you say the earlier acquisition date will benefit you. For the purposes of capital gains, shares acquired in this way are assumed to have been purchased at no cost.

That means capital gains is liable on the full sale price (apart from the annual capital gains tax allowance of €1,270).

You will also not be able to benefit from your wife's capital gains tax allowance. Despite the fact that you are assessed jointly, the capital gains tax relief is expressly tied to the individual. If the shares are in your name, only your tax allowance will come into play. The only way around that would be if the shares were held in joint names.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, D'Olier Street, Dublin 2 or email to dcoyle@irish-times.ie. This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering queries. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.