Redemption of shares—procedure

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

  • Redemption of shares—procedure
  • Preliminary considerations
  • Terms, conditions and manner of redemption
  • Payment for redemption of shares
  • Procedure for payment out of capital
  • Directors’ statement and auditor’s report
  • Shareholder resolution
  • Public notices
  • Directors’ statement and auditor’s report available for inspection
  • Objection to a payment out of capital
  • More...

Redemption of shares—procedure

This Practice Note describes the procedure for a limited company to carry out redemption of its redeemable shares.

Companies must comply with Part 18 of the Companies Act 2006 (CA 2006) when issuing redeemable shares and carrying out a redemption of those shares.

There are additional procedural requirements in relation to a redemption of shares for:

  1. listed companies, which must comply with both CA 2006 and the Listing Rules, and

  2. AIM companies, which must comply with both the CA 2006 and the AIM Rules for Companies

For further details on the additional procedural requirement for listed companies and AIM companies, see Practice Note: Public company redemptions of shares—initial considerations.

Preliminary considerations

Before proceeding with a redemption of shares, a company should consider a number of issues. For further detail on these preliminary considerations, see Practice Note: Private company redemptions of shares—initial considerations.

Terms, conditions and manner of redemption

A redemption of shares will be carried out in a manner, and in accordance with terms and conditions, already set by the directors when the redeemable shares were allotted or in the articles of association of the company. For further information, see Practice Note: Issue of redeemable shares.

Payment for redemption of shares

Redeemable shares in a limited company may not be redeemed unless they are fully paid.

The redeemable shares must be paid for on redemption unless the terms of redemption provide that

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