A company may acquire its own shares from an existing shareholder by purchase, or in the case of redeemable shares, by redemption or purchase. A company may redeem or buyback its shares to one issued share and the 10% rule that was in the old Companies Act no longer applies.

A redemption of shares is where the proposed shares to be redeemed are currently redeemable shares in name or are converted to redeemable shares before the redemption. A buyback of shares involved the proposed shares are bought back in its current form and a contract is used for the purchase. The contract must be made available to the members 21 days before the meeting to approve the buyback.

Distributable Profits

A redemption or buyback of shares should be made only out of:

  • profits available for distribution (sufficient distributable profits); or
  • where the company proposes to cancel, pursuant to section 106, shares on their acquisition, the proceeds of a fresh issue of shares made for the purposes of the acquisition

The acquisition by a company of its own shares shall be authorised by:

  • the constitution of the company;
  • the rights attaching to the shares in question; or
  • a special resolution of the members

Cancellation of Shares

When the shares have been redeemed or bought back the shares can either be cancelled or held as treasury shares. In most cases the shares are cancelled and are no longer in issue.

Tax Advice

Appropriate tax advice should be obtained prior to a redemption or buyback of shares being commenced.

How Can CLS Help

We can prepare the necessary board minutes, member resolutions, CRO forms and update the statutory register for the company. If you require assistance contact one of the team on 059 9186776 or send us an email.

 

Please Note:

Our CLS Insights aims to bring you practical information and news on Company Law and Company Secretarial. We cover the topics that matter to your business and give practical tips and also the benefit our experiences. Please remember this article is a guide and legal advice should always be obtained. If you have any queries please contact one of the team and we would be happy to help.

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