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Company share buybacks



Sun 10 December 2023 Company share buybacks

Reasons for a share buyback

A share buyback is where a company repurchases its own shares from the shareholders. There are 3 main reasons private limited companies may think about repurchasing the company shares. In order of popularity these are :-

Legal issues with company repurchase of shares

There are a number of legal considerations that must be taken into account when a private company repurchases its own shares. These include:

Pricing and funding of share buyback

A buyback has to be funded from distributable reserves (post tax profits) and the price can be set at any amount as long as acceptable to the selling shareholders. If the buyback is not funded from distributable reserves, HMRC may refuse advantageous tax treatment.

There are some ways around the distributable reserves problem if a company does not have funds in the bank. Options include :-

Key clauses in the Share buyback agreement


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