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Buy Back Of Shares Considerations Notes

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Work Shop 8 Buy back Shares

Buy-back of Shares: Considerations?Why??Commer cial Problem sLook also at the Maintenance of Capital notes (BB is an exception) Return member's investment where no 3rd P can be found to purchase the shares (which means the member is ?) Return money to member rather than by dividend By decreasing the number of shares in issue, it increases the earnings per share and company is more attractive to investors and existing shareholders (so investors and members are ?) It facilitates the removal of a D / problematic member Ds should always keep in mind their Duties (particularly s.172) when consideration it Shares Bought Back are immediately cancelled under s.706(b)(i), so the Ds are essentially giving away money for no consideration (which makes the consideration of their duties all the more important (i.e. s.172))

(a) The 'lost' money spent on the buy-back cannot be used to make more profits for Sharehol the existing shareholder (?) der (b) Company's funds become depleted, meaning that it is stepping closer to Concern insolvency and, because members are at the bottom of the list, they won't get s their investment back (?) (a) Company's funds become depleted, meaning that it is stepping closer to Creditor insolvency (?) Concern (b) The reduction in the original pool of capital will mean that creditors will receive a s smaller proportion (?) Effect

Consider the effect on the change in voting control

Dividends?Only distributed if there are profits available (s.830) at the sole discretion and amount that the Ds think fit by members passing an OR (MA30(1) / TA102) Formula: 'all realised profits to date' LESS 'all realised losses to date =
distributable profit or loss A breach of s.830: o Ds who authorised the dividend are jointly and severally liable for the full amount o Member should refund the full amount if knew/reasonable grounds it was unauthorised

Redeemable Shares??

Can only issue them if you already have ordinary shares (s.684(4)) The articles must expressly permit it for public companies For private, there must be an express restriction in it Private companies may redeem redeemable shares from: o Distributable profits; and o Capital (if Articles permit); and 1

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