Q&As

Can a share buyback contract incorporate by reference provisions of a company’s articles of association?

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Published on LexisPSL on 04/04/2017

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

  • Can a share buyback contract incorporate by reference provisions of a company’s articles of association?

This Q&A assumes that the company in question is a private company limited by shares proposing to buy back shares off-market and that the proposed share buyback is not for the purposes of, or pursuant to, an employees’ share scheme within the meaning of section 1166 of the Companies Act 2006 (CA 2006).

It looks at whether a share buyback contract can be entered into that incorporates, by reference, provisions of a company’s articles of association that require it to buy back shares in certain circumstances.

The contract required for an off-market share buyback (unless it is a share buyback for the purposes of, or pursuant to, an employees’ share scheme) must be approved by a shareholder resolution, rather than the specific share buyback itself.

The contract that is approved may be a contract, entered into by the company and relating to shares in the company, that does not amount to a contract to purchase the shares, but under which the company may (subject to any conditions) become entitled or obliged to purchase the shares.

It is also possible for a share buyback contract to incorporate by reference terms set out in a company’s articles. The CA 2006 does not require a share buyback contract to exist as a stand-alone agreement and the court has confirmed that this is unnecessary (Dashfield v Davidson).

However, there are a number of

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