Own Share Purchase Out Of Profits/New Share Issue/Cash - Written Shareholders' Resolution

There are two valid methods for UK private limited companies to approve a purchase of its own shares (“share buyback”) out of distributable profits, the proceeds of a new issue of shares, or cash, under sections 690–700 of the Companies Act 2006. Such approval forms step 3 of the procedure and requisite templates as described in Own Share Purchase/Buyback from Profits  and fully detailed in the Share Buyback Out Of Profits Guidance Notes.

Under section 694 of the Companies Act 2006, a private company cannot purchase its own shares unless the terms of the contract to purchase per step 2 are approved by the shareholders via an ordinary resolution. 

This Own Share Purchase Out of Profits/New Share Issue/Cash – Written Shareholders’ Resolution is the written resolution that must be sent to the shareholders so that they can approve the contract required for the purchase by a private company of its own shares. 

The alternative method is for Share Buyback General Meeting Minutes.

Approval by Ordinary Resolution via Written Resolution

Circulation requirements: 

• When the resolution is circulated, a copy of the contract to purchase (or memorandum) must be sent to every eligible shareholder at or before the time the written resolution is sent out. 
• The Circulation Date will usually be the date of the board meeting approving the circulation of the written resolution but it can be a later date. 
• The date when the written resolution lapses must be 28 days after the Circulation Date
• Shareholders must have access to the full terms before deciding whether to approve it.

Voting restrictions (s.695): 

• Any member whose shares are to be purchased is not an eligible member, meaning they do not receive or vote on the resolution.

After approval: 

• Once shareholders representing more than 50% of voting rights have signed the resolution, it becomes effective. 
• The company may then execute the contract and proceed to purchase the shares. 
• Download and complete the letters to Companies House (Step 4).
• Filing and record-keeping obligations (SH03, SH06, and retention of the contract) are the same as for the meeting method (Step 5).

How to Use this General Meeting Minutes Template?

The wording should be amended by choosing whether the share purchase will be out of distributable profits, a new share issue or cash and deleting the inapplicable options. The option used must be consistent with paragraphs 4, 5 (a), 5 (b), and 6 (a) of Own Share Purchase Out of Profits/New Share Issue/Cash – Board Resolutions.

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