Own Share Purchase Out Of Profits/New Share Issue/Cash – Guidance Notes

There are two types of situations when a company can buy its own shares:

- Purchase of own shares; and

- Redemption of redeemable shares.

A purchase of own shares is when a company purchases shares in itself from an existing shareholder and the shares purchased are not redeemable shares.

A company can purchase its shares:

- out of profits;

- out of the proceeds of a fresh/new issue of shares;

- (in limited circumstances) using cash; or

- out of capital.

This document deals with the procedures that must be followed by private limited companies in order to purchase their shares out of profits, the proceeds of a fresh/new issue of shares or cash, the so called "off market purchase", and does not deal with public companies (market purchase).

This document deals with own share purchase. For redemption of redeemable shares please see "Redemption Out of Profits - Guidance Notes" or "Redemption Out of Capital - Guidance Notes".

These Guidance Notes have been most recently updated to reflect the July 2021 introduction by HMRC of mandatory electronic Stamp Duty processes to replace their previous physical stamping system.

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