There are various situations where a private company may find it beneficial to buy-back its own shares. These include: 

• retirement or death of a shareholder
• breakdown in shareholder relationship
• under an employee share incentive scheme
• other similar or related circumstances

Death or retirement

On the retirement or death of a shareholder, rather than the remaining shareholders acquiring the shareholding of the party concerned, it can be attractive for the company to purchase the shares. The other shareholders may not wish to increase their investment in the company, but be equally reluctant to allow the involvement of an “outside” third party.

A purchase of own shares by the company may provide the best solution, by enabling the outgoing party to liquidate his stake in the company. 

Breakdown of a relationship

Where there is a breakdown in the relationship between shareholders, often the solution is to create an exit opportunity, so that the dissenting party can leave and realise a fair value for his shares. The remaining shareholders may not be willing or able to buy out the other party at that time using their own funds.

Under employee share incentive schemes an option for the company to re-purchase a party’s shares on ceasing to be an employee is quite common.

Companies act 2006

The Companies Acts 2006 sets out a number of criteria and detailed procedures that must be followed in order for a company to lawfully purchase its own shares. Consideration will also need to be given to the tax implications of undertaking an own share purchase.  

How we can help

Our coroporate solicitors can ensure that you comply with these criteria and procedures, and that you are aware of the tax considerations that you should discuss with your tax adviser.

Contact us now

For further information or to arrange an appointment contact a member of the corporate team on 0115 9 100 200 or email corporate@actons.co.uk or fill in the contact form below.