BLP (18)
Terms
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- Are companies permitted to use cash to do an own share purchase/buyback?
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Yes, the cash can be either:
- Distributable profits; or
- Capital. - Why might a company choose to redeem/buy back shares?
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(1) Reduce issue so share price increases;
(2) More control (closer to 50% or 25%);
(3) Company has a lot of capital;
(4) Tax efficiencies. - Can shares not issued as redeemable shares be purchased back as redeemable shares?
- No. The shares must be identified as redeemable in the company's articles when issued.
- Can a company hold shares that have been purchased back in Treasury?
- Yes any company can from 30 April 2013.
- What should you consider when a company is buying shares back from a director?
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Directors duties:
(1) Disclose interest (s. 177)?
(2) Can D vote (MA14)?
(3) Is the purchase a substantial property transaction? (remember s. 192(a) - does not apply if T is between C and a M).
- Is shareholder approval required for the purpose of interim dividends?
- No
- What should you advise when distributable profits are being used to wholly or partly finance the purchase of shares?
- The amount of distributable profits available should be verified by the company's accountants.
- Confirm what you should advise when distributable profits are being used to wholly or partly finance the purchase of shares?
- Capital amount should be verified by the company's accountants.
- Who usually pays tax when a company redeems or purchases its own shares?
- The shareholder
- In what circumstances might a company not have to pay stamp duty on a purchase of its own shares?
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(1) Less than £1,000; or
(2) one of the few limit exceptions applies.