Share buybacks—a quick guide
Share buybacks—a quick guide

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

  • Share buybacks—a quick guide
  • Off-market or on-market?
  • Preliminary issues
  • Financing
  • Procedure
  • Effect of the share buyback
  • Share buybacks by way of tender offer
  • Treasury shares

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 that is proposing to carry out a share buyback. In particular, a listed company must have regard to the Listing Rules (LRs) and the Disclosure Guidance and Transparency Rules, and an AIM company must have regard to the AIM Rules for Companies (AIM Rules). Both types of companies may also 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.

Off-market or on-market?

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

  1. an off-market purchase of shares, or

  2. a market (or ‘on-market’) purchase of shares

The statutory procedure to be followed for a share buyback differs depending upon whether it is to take place on-market or off-market, as well as other factors, such as the purpose of the share buyback and the type of company undertaking it.

A share buyback is off-market if the shares are:

  1. purchased otherwise