In order to purchase its own shares, a limited company must comply with Part 18 of the Companies Act 2006. On 6th April 2015 the Companies Act 2006 (Amendment of Part 18) Regulations 2015 came into force. The aim of the 2015 Regulations is to clarify the changes made to share buybacks in April 2013. Changes were introduced to share buyback rules in April 2013 to make it easier for private companies to authorise and finance a buyback of shares. A summary of the changes made in 2013 can be accessed here.
However, certain minor omissions affecting the operation of share buybacks were subsequently identified in the 2013 Regulations. These omissions have been clarified by the 2015 Regulations. Changes to share buybacks made by the 2015 Regulations include:
• Allowing private companies to buy back small quantities of shares out of capital using the de minimis exemption without being subject to the permissible capital payment provisions in Part 18 of the Companies Act 2006. Private companies buying back shares out of cash have already been able to use this exemption;
• Moving the de minimis exemption to a new statutory section of the Companies Act 2006 and clarifying that the maximum aggregate purchase price under the exemption is the lower of £15,000 or 5% of the nominal value of the company’s fully paid share capital as at the beginning of the financial year, provided a company is authorised to use the exemption by its articles;
• Shares bought out of cash are no longer to be held in treasury;
• Clarification relating to the timing of when shares are surrendered and when they must be paid for when shares are bought back pursuant to an employees’ share scheme; and
• Removing the requirement for companies to provide a statement of capital in relation to a cancellation of shares pursuant to an employees’ share scheme if this would only be replicating one already delivered.
We have updated our guidance notes and the relevant templates in our Own Share Purchase Profits and Own Share Purchase Capital sub folders to incorporate these changes.
The contents of this Newsletter are for reference purposes only and do not constitute
legal advice. Independent legal advice should be sought in relation to any specific