Private company redemptions of shares—initial considerations
Private company redemptions of shares—initial considerations

The following Corporate guidance note provides comprehensive and up to date legal information covering:

  • Private company redemptions of shares—initial considerations
  • Initial considerations
  • Financing a redemption of shares
  • Carrying out a redemption of shares

A limited company that proposes to carry out a redemption of redeemable shares must comply with the provisions of the Companies Act 2006 (CA 2006). In addition to the provisions of the CA 2006, there are other rules and guidelines that are relevant to a listed company or an AIM company (for further information, see our Practice Notes on public company redemptions of shares).

For a discussion of the legal requirements that a company must comply with in order to issue redeemable shares, and the reasons why a company may redeem its shares, see Practice Note: Issue of redeemable shares.

Initial considerations

Before proceeding with a redemption of shares, a private limited company should consider:

  1. the terms, conditions and manner of the redemption of those shares

  2. whether its share capital meets the requirements for a redemption of shares laid down by CA 2006, Pt 18

  3. any approvals that may need to be obtained in relation to the redemption of shares

  4. the relevance of the CA 2006 provisions relating to substantial property transactions to the redemption of shares

  5. whether the company's banking facilities contain any restrictions that could affect the redemption of shares

  6. whether consent will be needed from the Financial Conduct Authority (FCA) or Prudential Regulation Authority (PRA) in relation to the redemption of shares

  7. whether the redemption