Private company share buybacks—procedure where no payment out of capital under CA 2006, Pt 18, Ch 5
Private company share buybacks—procedure where no payment out of capital under CA 2006, Pt 18, Ch 5

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

  • Private company share buybacks—procedure where no payment out of capital under CA 2006, Pt 18, Ch 5
  • Off-market or on-market?
  • Initial considerations and financing
  • Share buyback to be financed out of capital under CA 2006, Pt 18, Ch 5
  • Share buyback contract
  • Shareholder approval of the share buyback contract (other than for an employees' share scheme buyback)
  • Written resolution
  • General meeting
  • Disclosure of details of share buyback contract
  • Duration of shareholder approval of share buyback contract
  • More...

A limited company may buy back shares in itself, if certain conditions set out in the Companies Act 2006 (CA 2006) are met. This is known as a share buyback or a purchase of own shares. In addition to the provisions of CA 2006, there are other rules and guidelines that are relevant to a listed company or an AIM company.

The restrictions in CA 2006 relating to share buybacks do not apply to unlimited companies. For further information on this type of company, see Practice Note: Unlimited companies.

For a summary of the regime for carrying out a share buyback, see Practice Note: Share buybacks—a quick guide.

For a consideration of the law applicable to a share buyback and information on why a company might wish to carry one out, see Practice Note: Share buybacks—the legal framework.

Off-market or on-market?

Only one type of share buyback is possible for a private limited company. It may only make an off-market purchase of shares. Therefore, this Practice Note does not deal with a market (or ‘on-market’) purchase of shares.

For an explanation of the differences between an off-market share buyback and an on-market share buyback, see Practice Note: Share buybacks—the legal framework.

Initial considerations and financing

Before proceeding with a share buyback, a private limited company should consider a number of key issues relating to:

  1. its power to lawfully carry out the share

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