Q&As

Can redeemable shares be subject to a reduction of capital?

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Published on LexisPSL on 25/03/2015

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

  • Can redeemable shares be subject to a reduction of capital?
  • Constitutional or contractual restrictions
  • Companies Act 2006
  • Solvency statement procedure
  • Additional considerations

In answering this Q&A we have assumed that the company in question is a private company limited by shares.

Constitutional or contractual restrictions

Before any reduction of capital is considered, a company must check that its articles of association do not prohibit or restrict it from reducing its capital (see section 641(6) of the Companies Act 2006 (CA 2006)). If the articles do contain any restrictions or prohibitions, they will need to be amended by a special resolution, which can be proposed as a separate special resolution at the same time as any special resolution to approve the reduction of capital is proposed (see below).

The terms of issue of the redeemable shares in question must also be carefully checked to ensure that they do not prohibit any action which the company wishes to take, eg specific restric

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