Returning capital to shareholders—B share schemes
Produced in partnership with Glafkos Tombolis

The following Corporate practice note produced in partnership with Glafkos Tombolis provides comprehensive and up to date legal information covering:

  • Returning capital to shareholders—B share schemes
  • What is a B share scheme and why is it used?
  • What are the advantages and disadvantages of a B share scheme?
  • How is a B share scheme generally structured?
  • Returning cash to shareholders—on or after 6 April 2015
  • Income
  • Returning cash to shareholders—pre-6 April 2015
  • Immediate capital option
  • Deferred capital option
  • B and C share schemes
  • More...

Returning capital to shareholders—B share schemes

What is a B share scheme and why is it used?

A B share scheme is one method used by UK companies to return excess capital to shareholders. It is used typically, but not exclusively, by listed companies.

It is important to note that companies can use alternative schemes to return excess capital to shareholders, such as:

  1. routine dividend payments

  2. 'special' dividend payments (essentially a one-off, usually large dividend, made outside a company’s routine dividend payment programme)

  3. share buybacks, or

  4. reductions of capital

For further details about these alternative methods of returning excess capital to shareholders, see Practice Notes: Dividends and distributions, Share buybacks—the legal framework and Reduction of capital—overview.

What are the advantages and disadvantages of a B share scheme?

The main advantages of a B share scheme over the other ways of returning capital to shareholders are that:

  1. if the B share scheme is structured as a redemption rather than a repurchase of shares, the company will not have to pay any stamp duty

  2. shareholders receive value pro rata to their existing shareholdings (this is not usually the case with share buybacks that are effected on-market, for example)

The principal advantage of the B share scheme, ie the ability of a shareholder to elect to receive the return as ‘capital’ or as ‘income’ which would entail different tax treatments, has been recently abolished

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