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Buyback Of Shares Notes

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A more recent version of these Buyback Of Shares notes – written by Cambridge And Oxilp And College Of Law students – is available here.

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Buyback of Shares Buying Shares Back Under s.690 the company can buyback shares, subject to checking the Articles of the company. The shares will be bought off-market (s.693(2)(a)) if they are not traded on a recognised investment exchange. A contract will be created between the company and the shareholder. This contract must be authorised by the shareholders using an ordinary resolution and must also be available for the shareholders to inspect for 15 days prior to the general meeting (s.696(2)(b)) or sent with the written resolution (s.696(2)(a)).

Funding the Buyback of Shares The buyback of shares can be funding in the following ways: 1 Capital (s.692(1)) which is the amount invested by the shareholders that cannot be distributed to protect creditors. There are additional restrictions on a buyback of shares using capital.

1. Distributable profits (s.692(2)(a)(i)) are the working profits of the company with all of the losses deducted off the profits.

2. Fresh issue of shares (s.692(2)(a)(ii)) can be used to fund the buyback of shares as long as the new shares were issued for the sole purpose of funding the buyback.

3. Cash (s.692(1ZA)) can be used to fund a buyback, but only up to the lesser of 5% of the company's share capital or PS15,000. The buyback must be funded first using the distributable profits, if more money is required then capital can be used to fund the rest of the buyback of shares.

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