The following Tax guidance note provides comprehensive and up to date legal information covering:
A limited company may buy back shares that it has in issue, provided 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 CA 2006 provisions, there are other rules and guidelines that apply to listed or AIM companies. In particular, a listed company must have regard to the Listing Rules and the Disclosure Guidance and Transparency Rules, and an AIM company, the AIM Rules. Both types of companies may also need to take institutional investor guidelines into account.
The restrictions on buybacks that are contained in CA 2006 do not apply to unlimited companies.
Companies carry out share buybacks for a variety of reasons. One reason might be to return surplus cash to shareholders that does not have a specific purpose and cannot be invested to produce a return greater than the cost of capital.
For other reasons why a company might consider doing a share buyback, see Practice Note: Share buybacks—the legal framework—Why buy back shares?
A 'tender offer' is an offer made by, or on behalf of, a company to its current shareholders in relation to its own shares. In making a tender
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