Share buy-backs by UK resident private companies

Key points

• Companies Act 2006 Pt 18 is prescriptive as to the required steps for a share buy-back.
• The decision in Russell Baker highlights the importance of Companies Act compliance.
• The consideration paid by the company for shares exceeded distributable profits.
• The misapplication of assets meant that the shareholder was holding funds on behalf of the company.
• The sharebuy-back legislation provides not only for fines but also imprisonment.
• The tax consequences of a void buy-back transaction.
• Care is required to avoid a conflict of interest when advising on share buy-backs.

It is with some trepidation that I begin to write this article which raises some important tax points concerning share buy-backs by UK resident private companies. The reason for my anxiety is that what follows arises from my take on the Companies Act 2006 – as amended by the statutory regulations in 2013 (SI 2013/600) and 2015 (SI 2015/532). I have deliberately used the expression ‘my take’...