Share buybacks—a quick guide

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

  • Share buybacks—a quick guide
  • Off-market or on-market?
  • Preliminary issues
  • Financing
  • Procedure
  • Off-market share buyback: shareholder approval
  • Off-market share buyback: shareholder approval for an employees’ share scheme
  • On-market share buybacks: shareholder approval
  • Other procedural steps
  • Effect of the share buyback
  • More...

Share buybacks—a quick guide

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. In particular, a listed company must have regard to the Listing Rules (LRs) and the Disclosure Guidance and Transparency Rules (DTRs). An AIM company must have regard to the AIM Rules for Companies (AIM Rules), but these do not specifically refer to share buybacks, so AIM Regulation has confirmed that compliance by an AIM company with the LRs in relation to share buybacks would represent best practice in most circumstances. An AIM company is also subject to DTR 5. In addition, both types of company may follow institutional investor guidance.

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 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?

Two types of share buyback are possible for a limited company:

  1. an off-market purchase

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