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INSIGHT: New regulations make it easier for companies to authorise and finance buybacks

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New regulations, intended to reduce ‘red-tape’ for businesses and to clarify the applicable statutory requirements when undertaking a buyback of shares, were published earlier this year under The Companies Act 2006 (Amendment of Part 18) Regulations 2015 (the “Regulations”). The Regulations are designed to make it easier for private companies to authorise and finance buybacks.

The key changes introduced by the Regulations include the following:

  • permitting a private company (if authorised by its articles) to make small buy backs out of its capital in a financial year, without being subject to statutory capital payment provisions. A ‘small buyback’ is defined as one where the aggregate purchase price is the lower of £15,000 or the nominal value of 5% of the company’s fully paid share capital as at the beginning of the relevant financial year;
  • linking the maximum aggregate purchase price that can be paid under the above “de minimis” exemption (5% of the company's fully paid share capital at the beginning of the relevant financial year) to the statutory provisions relating to accounting and capital payments;
  • providing clarification on the timing between when the shares are to be surrendered and when payment is to be made, where shares are bought back for the purposes of an employee share scheme; and
  • removing the requirement to deliver a statement of capital when shares are cancelled following a buy back for the purposes of an employee share scheme, if this would replicate one already delivered.

Should you have any queries regarding the subject matter of this article or need any assistance relating to a buy back of shares generally, please contact Keith Kennedy (partner in our Corporate and Commercial Department) at keith.kennedy@pearsonlegal.co.uk or by telephoning Keith on 0161 684 6942.

Please note that the information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Pearson Solicitors and Financial Advisers Ltd or any of its members or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.

This blog was posted some time ago and its contents may now be out of date. For the latest legal position relating to these issues, get in touch with the author - or make an enquiry now.

Written by Keith Kennedy

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