If the answer to any of the above questions is ‘yes,’ then you may benefit from performing a share buyback. The most common form of buyback is a purchase out of profits, but there are a couple of other ways to finance the transaction.
Purchase out of profits
If the company has accumulated, distributable profits, it can usually use them to finance the buyback. Many long-established companies have such distributable profits, shown on the balance sheet as revenue reserves.
Purchase out of fresh issue of shares
This is where the company issues new shares to raise the money to buy back some existing shares. It is not commonly done, and is likely to be more complex in nature than a purchase out of profits. However, it can be useful in certain circumstances, for example where the company wants to buy back a particular existing class of shares and to raise the cash to do so by issuing shares of another class.
Purchase out of capital
A private company can buy back its shares by making a permissible capital payment. There are detailed rules and procedures to be followed, and such a transaction is likely to be quite complex.
The Company Law Solutions service provides everything required to be legally compliant, including:
- guidance as to the applicable procedures
- contract for the purchase of the shares by the company
- minutes of directors' meetings
- notices of shareholders' resolutions
- shareholders' consents to resolutions
- completed official forms for Companies House
- our straightforward, step by step guide to completing the procedures
|Buy back of shares||From £300.00 + VAT||Quote|
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