Q&As

Are there any restrictions on two companies holding shares in one another?

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Published on LexisPSL on 06/04/2016

The following Corporate Q&A provides comprehensive and up to date legal information covering:

  • Are there any restrictions on two companies holding shares in one another?

Section 136 of the Companies Act 2006 (CA 2006) states that:

'(1) Except as provided by this Chapter—

(a) a body corporate cannot be a member of a company that is its holding company, and

(b) any allotment or transfer of shares in a company to its subsidiary is void.

(2) The exceptions are provided for in—

section 138 (subsidiary acting as personal representative or trustee), and

section 141 (subsidiary acting as authorised dealer in securities).'

CA 2006, s 136 is designed to prevent indirect acquisition by a company of its own shares, sustaining the common law rule established in Trevor v Whitworth, where the House of Lords held that acquisition by a company of its own shares was prohibited even if authorised in it

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