| Commentary

204 Financing of redemption

| Commentary

204 Financing of redemption

A private limited company may redeem redeemable shares out of capital provided that it follows the correct procedure under the 2006 Act1. In other cases, a company may only redeem the shares out of its distributable profits or the proceeds of a fresh issue of shares made for the purpose2. If the company is paying a premium on redemption, this must be paid out of its distributable profits3, unless the redeemable shares were issued at a premium, in which case the company may use the proceeds of a fresh issue

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