Share Buy Backs Set to Become Easier

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When the Regulations amending Part 18 of the Companies Act 2006 come into force on 30 April 2013, companies will find it much easier to buy back their own shares.  The Regulations include amendments that make deregulatory changes to provisions of the Act in particular the authorisation and financing of share buy backs.

A review found that companies seeking to utilise direct share ownership faced challenges pertaining to the regulatory burdens and restrictions associated with buying back shares.  The amendments make it easier for companies that want to buy back shares and to hold shares in treasury.

Some of the key changes brought about by the Regulations are:

  • Removing the requirement to pay the full price of shares on purchase in cases where the buy back is for an employees’ share scheme;
  • Permitting the use of cash without having to identify it as distributable reserves to finance the buy back of its own shares (up to £15,000 or 5% of the share capital of the company in a financial year);
  • Reducing shareholder authorisation concerning contracts for share buy backs to ordinary rather than special resolution;
  • Provided the company has an authorising shareholder resolution, allowing a company to make off-market purchases of its own shares without having each buy back contract approved by shareholder resolution;
  • Reducing the requirement in the case of buy backs the purpose of which is pursuant to an employees’ share scheme to a statement by the directors that the company is solvent and a special resolution by the shareholders; and
  • Allowing shares to be held in treasury and being dealt with as treasury shares.

With a reduction in the regulatory requirements, share buy backs may become more common and companies will find that the administrative cost in doing so is reduced.  For advice on share buy backs for your business, contact a member of the Forbes Solicitors Business Law team or call 01254 222399.

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