Q&As

Is it possible for a private limited company to become the sole shareholder in itself, where it has been gifted the only share it has in issue by its sole shareholder?

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Published on LexisPSL on 01/09/2016

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

  • Is it possible for a private limited company to become the sole shareholder in itself, where it has been gifted the only share it has in issue by its sole shareholder?

When a private limited company is given one of its own shares as a gift, this is effectively a buy back by the company of its own share otherwise than for valuable consideration for the purposes of the Companies Act 2006 (CA 2006). Such a share buyback falls outside the regime governing share buybacks set out in CA 2006, Pt 18, by virtue of CA 2006, s 659(1). For more information on share buybacks otherwise than for valuable consideration, see our Q&A: How can a private limited company acquire its own shares for no consideration (ie accept them as a gift)?

Although we can find no express authority for the proposition that a company can (or cannot) be the sole shareholder in itself, it is difficult, logically, to see how a company can effectively be owned by itself.

It also seems contrary to the fundamental common law principle of maintenance of capital, which is that, in general, a company's share capital is re

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