Share buybacks

Share buybacks

A company may purchase shares in itself. This is known as a share buyback or a purchase of own shares.

For an introduction to share buybacks, see Practice Note: How to carry out a share buyback.

Legal framework

A share buyback by a limited company must be carried out in accordance with Part 18 of the Companies Act 2006 (CA 2006).

Two types of share buyback are possible:

•
an off-market purchase of shares, or
•
a market (or on-market) purchase of shares

The statutory procedure to be followed for a share buyback differs depending upon whether it is to take place off-market or on-market.

In addition to the provisions of CA 2006, there are other rules and guidelines that are relevant to a listed company or an AIM company that is proposing a share buyback. A listed company must have regard to the UK Listing Rules (UKLRs) and the Disclosure Guidance and Transparency Rules (DTRs), while an AIM company must have regard to the AIM Rules for Companies and some aspects of the DTRs, ie DTR 5. Both listed companies and

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