Share Buyback Out of Profits, New Issue or Cash

What is a Share Buyback?

A share buyback, also known as purchase of own shares, is when a company purchases shares in itself from an existing shareholder 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 most commonly undertaken to return surplus cash to shareholders or facilitating shareholder exits.

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 former. Templates for the latter procedure are provided at Share Buyback Out Of Capital.

Compliance with the Companies Act

This combination of templates provides the requisite documentation for Own Share Purchase Out of Profits and follows 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.

What templates are required for a Share Buyback?

Before applying the sequential/combined templates below please download the Share Buyback Out of Profits 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:

Share Buyback Out of Profits/New Share Issue/Cash Board Minutes and Resolution is an ordinary resolution for the approval of the purchase, the option to use cash (in limited circumstances) and the ability to hold shares in treasury. It can be amended for use by a sole director. In addition to standard board meeting clauses, it provides for the presentation of a draft contract to purchase and ordinary resolution (which may be a written resolution) of the members of the company, and an optional clause providing for the issue of new shares.

In order for a private limited company to purchase its own shares there must be a valid Share Buyback Contract to Purchase and an ordinary resolution must be passed in order to approve the contract.

The ordinary resolution can be passed either by the Own Purchase Out of Profits/New Share Issue/Cash Written Shareholders' Resolution or by a general meeting of shareholders and recorded by the Own Purchase Out Of Profits/New Share Issue/Cash - General Meeting Minutes. Please refer to the Guidance Notes for an explanation of these two different procedures for approval.

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.

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Alternative Share Buyback Templates

Share Purchase/ Buyback Out Of Capital

All Making Changes to Share Capital