George Green LLP Welcomes Two New Family Solicitors to Sutton Coldfield Office
George Green LLP is thrilled to announce the expansion of its Family Law team with the...
News & Blogs
A share buyback is a purchase by a company of its own shares from shareholders. The shares “bought back” are then effectively cancelled.
A limited company is only permitted to purchase its own shares in accordance with Part 18 of the Companies Act 2006 (the “CA 2006”). Part 18 of the CA 2006 must be strictly followed to ensure that any buyback is valid.
Types of Share Buybacks
Under the CA 2006, shares must either be repurchased pursuant to an ‘off-market’, or ‘on-market’ buyback. In general, off-market purchases are available to both private and public limited companies but only certain public companies are able to make market purchases. This blog focuses on off-market buybacks.
A buyback is deemed off-market if the shares are not purchased on a recognised investment exchange, such as the London Stock Exchange; or if the shares are purchased on a recognised investment exchange, they are not subject to a marketing arrangement on the exchange.
Funding Share Buybacks
A share buyback can be funded by any of the following means:
How the buyback is financed will determine the procedure to be followed to carry out the buyback. However, if the company does not have the cash available to pay for the shares, the company cannot buy back the shares. The most usual way to fund a share buyback is using the company’s distributable profits.
Requirements for Share Buybacks
Part 18 of the CA 2006 governs buybacks and notably there should be:
Why would a Company do a Share Buyback?
There are numerous reasons as to why a company would want to buy back its own shares but you might consider it for any of the following reasons:
If you or your business require information regarding anything in this blog or generally about your business or any other corporate matter, please call Sarah Ward, one of our Corporate partners, on 07889 589596 or e-mail Sarah at sward@georgegreen.co.uk for advice and assistance.
Contact our offices
Make an enquiry