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Share buybacks (or a ‘purchase of own shares’ as the process is also know) are an effective way of returning capital to a shareholder or investor in a company. Whilst the process is relatively straight forward, Part 18 of the Companies Act 2006 sets out very specific requirements for a buy back.
If these requirements are not met then the transaction is void and an offence is committed by the directors of the company. For this reason it is critical to get the share buyback agreement right.
Buying back its own shares by a company can be completed out of both distributable reserves, cash or capital. Our team has substantial experience in assisting companies of all sizes in relation to share buy backs and assisting individuals in selling back their shares to a company.
Examples of share buybacks that we have worked on include:
- The £1.2 million buy back a care company of 1/3 of its share capital from a founder shareholder.
- A small share buyback from a company buying back shares from a retiring employee who held a few shares that had been issued as part of an incentives package.
- A Trust selling its shares back to a company in which it owned shares as an investment.