The rule against acquisition of a company's own shares
The rule against acquisition of a company's own shares

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

  • The rule against acquisition of a company's own shares
  • The offence of acquisition of limited company's own shares
  • Sentencing for an offence of acquisition of company's own shares
  • The offence of assistance for the acquisition of shares in a public company
  • Sentences for assisting the acquisition of shares in a public company
  • Offence of failing to supply documents to registrar following the reduction of share capital
  • Sentencing for failing to supply documents to the registrar following the reduction of share capital

The offence of acquisition of limited company's own shares

The general rule is that a limited company must not acquire its own shares, whether by purchase, subscription or otherwise, except in accordance with the provisions of the Companies Act 2006. A limited company may acquire any of its own fully paid shares if it does not pay for them, that is they may not give valuable consideration for their acquisition . The general rule prohibiting a limited company acquiring its own shares does not prohibit:

  1. acquisition in accordance with the statutory scheme for the purchase by a company of its own shares

  2. the acquisition of shares in a reduction of share capital duly made

  3. the purchase of shares in pursuance of an order of the court; on application to the court to cancel resolution for re-registration as a private company, on objection to redemption or purchase of shares out of capital, under a remedial order in case of breach of prohibition of public offers by private company or as protection of members against unfair prejudice, or

  4. the forfeiture of shares, or the acceptance of shares surrendered in lieu, in accordance with the company's articles for failure to pay any sum payable in respect of the shares

A company is not precluded from acquiring the shares of another company whose