Generally, a company is forbidden to buy back its own shares because the share capital, once raised, must be maintained in the interests of fairness to creditors. However, a company can buy back shares from its members provided certain conditions laid down in the Companies Act are met. The ability of the company to buy back its shares can be useful in a variety of situations including when:

• The majority of shareholders want to buy out a dissenting member;
• A member wants to leave;
• A shareholder dies and the other members do not want to increase their own shareholding or to take in a new member;
• Redeeming redeemable shares;
• A company has accumulated more capital that it needs and would like to return some to its shareholders

There are important legal and taxation implications stemming from a buy back as well as various procedural requirements to be met and professional advice is vital before embarking on such a course. For advice on Company and Commercial matters please contact:

Glyn Evans on 01934 637911 e-mail evans@powellslaw.com or
Stephen Soper on 01934 637915 e-mail soper@powellslaw.com.