New share buyback regulations aim to simplify process for SMEs

In order for a private company to buy back its own shares, it must comply with the provisions of the Companies Act 2006. Failure to adhere to the relevant provisions renders the buyback void, and the company and its defaulting directors will commit an offence.

New regulations, which came into force on April 30th 2013, have, however, relaxed certain of the statutory requirements in respect of private company share buybacks. One of the main aims of which is to make buying back shares from employees easier for small and medium-sized enterprises (SMEs). The changes may also encourage more SMEs to introduce employee shareholder arrangements.

Some of the relaxations for private companies include:

  • Buying back shares annually up to a value not exceeding the lower of £15,000, and  5% of the value of its share capital, even if distributable profits are not available
  • The ability to hold shares in treasury, thus making issuing equity to new and existing employees easier
  • Simple majority shareholder approval (ordinary resolution) instead of 75%+  shareholder approval (special resolution) for buybacks, including the ability to pass an ordinary resolution granting general authority enabling multiple buybacks for the purposes of an employees’ share scheme

You can see the government’s simple guide to the new regulations here.

Need advice on issuing or buying back shares?

Please call Andrew Tarbutt on 01482 324252 or email for advice and/or to discuss how you might take advantage of these recent changes.

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