Share Buyback Out of Capital

What is Own Purchase of Shares Out of Capital?

An own share purchase or share buyback out of capital, also known as an ‘off market purchase’, is when a company purchases its own shares using its share capital rather than profits or reserves and the shares purchased are not redeemable shares, templates for which can be downloaded from Redemption of Shares Out Of Profits. For private limited companies, this is typically undertaken when there are insufficient distributable profits to fund the buyback, often to facilitate shareholder exits or restructure ownership.

There are two main methods and processes for share buybacks; Out of profits, cash or the proceeds of a new issue of shares or out of capital. The templates listed below provide for the latter. Templates for the former procedure are provided at Own Share Purchase Out of Profits, New Issue or Cash.

Compliance with the Companies Act?

This combination of templates provides the requisite documentation for Own Share Purchase Out of Capital and follow strict procedures to ensure compliance with the Companies Act 2006, reflecting April 2013 Regulations and the changes made to the share buyback process by the Companies Act 2006 (Amendment of Part 18) Regulations 2015.

They have been drafted, regularly reviewed and kept up-to-date by experienced corporate lawyers. These share purchase/buyback documents have been and are being continually applied by solicitors, accountants, finance directors, company secretaries and business owners and managers.

Which templates are required for a Share Purchase Out Of Capital?

Before applying the sequential/combined templates below please download the Own Share Purchase Out Of Capital Guidance Notes. These will help you follow and complete the share purchase / buyback procedures.

The list of documents provides a set of templates for Employees Share Schemes (ESS) as well as the standard set for share buybacks which include the following:

Own Share Purchase Out Of Capital - Board Resolutions is a set of resolutions for approving the purchase of a company’s own shares using capital, in accordance with the Companies Act 2006. It can be amended for use by a sole director. In addition to standard board meeting clauses, it provides for the directors’ solvency statement, the presentation of a draft purchase contract, a special resolution of the members (which may be a written resolution) approving the use of capital, and references to the filing and public notice requirements.

In order for a private limited company to purchase its own shares there must be a valid Own Share Purchase Out Of Capital - Contract To Purchase  and an ordinary resolution must be passed in order to approve the contract. The payment out of capital must also be approved by the shareholders. A special resolution is required for this.

The directors must make a statement in the prescribed form supported by an auditor’s report. The Directors’ Statement is a statement of the solvency of the company. Please refer to the Own Share Purchase out of Capital – Directors’ Statement which contains the required wording.

The ordinary resolution can be passed either by the Own Share Purchase Out Of Capital - Written Resolutions or by a general meeting of shareholders recorded by the Own Share Purchase Out Of Capital - Minutes. Please refer to the Guidance Notes for an explanation of these two different procedures for approval.

Within the week following the passing of a special resolution regarding the use of capital, the company must publish an Own Share Purchase out of Capital – Public Notice of the proposed payment in the Gazette and must either arrange for a similar notice to be published in a national newspaper or give written notice to that effect to each of its creditors. 

Having followed the procedures and completed the above documents, download the cover letters to Companies House and Companies House form SH03 notifying Companies House of the share buyback, and Companies House form SH06 for notification of cancellation of the repurchased shares when those shares are not to be held in treasury.  

• Guidance Notes: Own Share Purchase Out Of Capital
• Own Share Purchase Out Of Capital - Board Resolutions
• Own Share Purchase Out Of Capital – Board Resolution (ESS – Multiple Buybacks)
• Own Share Purchase Out of Capital – Board Resolutions (ESS version of Special Resolution)
• Own Share Purchase Out Of Capital - Contract To Purchase
• Own Share Purchase Out Of Capital – Contract to Purchase (ESS)
• Own Share Purchase Out Of Capital - Directors' Statement
• Own Share Purchase Out Of Capital – Solvency Statement for ESS Purchase
• Own Share Purchase Out Of Capital - Written Resolutions
• Own Share Purchase Out Of Capital – Written Resolution (ESS – Multiple Buybacks)
• Own Share Purchase Out Of Capital – Written Resolutions (ESS version of Special Resolution)
• Own Share Purchase Out Of Capital - Minutes
• Own Share Purchase Out Of Capital – Minutes (ESS – Multiple Buybacks)
• Own Share Purchase Out Of Capital – Minutes (ESS version of Special Resolution)
• Own Share Purchase Out Of Capital – Letter to Companies House (Multiple Buybacks Resolution)
• Own Share Purchase Out Of Capital - 1st Letter To Companies House
• Own Share Purchase Out Of Capital – 1st Letter to Companies House (ESS)
• Own Share Purchase Out Of Capital - 2nd Letter To Companies House
• Own Share Purchase Out Of Capital - Public Notice
• CHF - SH03 - Return Of Purchase Of Own Shares
• CHF -SH06 - Notice Of Cancellation Of Shares
• CHF - SH19 – Statement Of Capital
• Statement Of Directors under Section 720B(5)

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