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The big buy-back
Key points
- A company purchase of own shares may be a useful exit strategy.
- Will the buy-back benefit the trade?
- Do the company’s articles permit a share buy-back?
- The sequence of events to be followed.
- Several tests and conditions must be satisfied.
Subject to specific conditions the Companies Act 2006 Pt 18 permits a company to use distributable profits or the proceeds from a new share issue to buy back its own shares from shareholders. A company purchase of own shares may therefore be useful in providing an exit strategy.
Once bought back the shares are normally cancelled although a company may purchase and hold its own shares (treasury shares).
If the conditions are met the distribution treatment for the purchase of own shares by an unquoted...
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