Welcome to Simply-Docs

Guidance Note: Redemption Out Of Capital


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

- Purchase of own shares; and
- Redemption of redeemable shares

A company can redeem redeemable shares:

- out of profits;
- from the proceeds of a new issue of shares; or
- out of capital.

There are very strict rules that companies must follow for the purchase or redemption of shares.

This document deals with redemption of redeemable shares out of capital; for an own share purchase please see “Own Share Purchase Out of Profits/New Share Issue/Cash – Guidance Notes” or “Own Share Purchase Out of Capital – Guidance Notes”.

If it has authority to do so, a limited company can issue shares which are to be redeemed or liable to be redeemed at the option of the company or the holder of the redeemable shares. Redeemable shares give the shareholder temporary membership in the company since shares issued as redeemable shares have the rights to be bought back (redeemed) by the company or the holder at a future date.

Please note that both private and public companies can purchase their own shares or redeem redeemable shares, but only private companies can reduce their capital in order to do so.

Once you have subscribed to the appropriate document folder click on the “Download Document” button below. You will be asked what you want to do with the file. It is recommended that you save the document to a location of your choice prior to viewing.

Guidance Note: Redemption Out Of Capital is part of Corporate Documents. Just £35.00 + VAT provides unlimited downloads from Corporate Documents for 1 year.

Simply-4-Business Ltd Registered in England and Wales No. 4868909 Unit 100, Parkway House, Sheen Lane, London SW14 8LS