If you are unsure of the changes made by the Buyback Regulations, or would like advice in respect of share buyback by private companies, Archers have specific expertise in this area in its corporate team. Watch this amazing presentation to know more.
New rules for Share Buybacks for Private Companies at Archers Corporate Service
New rules for Share Buybacks for Private Companies at
Archers Corporate Service
Before the enforcement of the Buyback Regulations 2013, private
companies may only purchase their own shares by using the distributable
profit of the company.
Since the enforcement of the Buyback Regulation, shares can now be
transferred into treasury where they have been purchased by a company
out of distributable profits or using the Cash De Minimis exemption.
The Buyback Regulations 2013 relaxed the administrative burden of
share buybacks for private companies. The changes introduced can be
summed up as following:
A reduction in the level of shareholder consent required to approve a
It extends the methods to finance a buyback to include the new ‘Cash
De Minimis’ exemption (it enhances the ability for a company to
manage the company share capital with or without distributable
reserves, to fund the share buyback for a cash consideration up to the
lower of £15,000 or 5% of its share capital in each financial year)
Private companies may hold shares in treasury. (The ability to hold
treasury shares was a right previously only available to qualified shares
in listed companies).
The treasury shares can be held indefinitely and can be cancelled at any
Private companies can take advantage of the use of treasury shares in
satisfying the exercise of employee share options without the cost or
administrative burden of an employee benefit trust (“EBT”). Shares can be
bought back from former employees and held in treasury pending
redistribution to new employees under an employee share scheme.
Where a company’s shares are held in treasury, the name of the
company must be entered in the register of members and to inform
the Registrar with regards to the creation of the treasury shares.
Whilst the company is entitled to hold treasury shares in order
prevent share dilution, the company cannot exercise any other rights
attached to the treasury shares such as the following:
right to dividends
right to capital distributions
(a). Stamp Duty
For stamp duty purposes, a company purchasing shares into treasury is
liable to pay stamp duty at 0.5% (unless the price is £1,000 or less). The
stamp duty treatment is the same as if the shares were cancelled
following a buyback.
(b). Share Transfer
If the company chooses to sell the shares, it must do so for ‘cash
consideration’. Transfers of treasury shares without consideration are
only permitted if it is for the purposes of an employees’ share scheme.
For tax purposes, any Shares sold or transferred out of treasury are
treated as if they have been newly issued. Therefore, there is no stamp
duty charge on the subsequent sale or transfer of the treasury shares.
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