This page sets out a summary of the additional procedural requirements for a private limited company to purchase its own shares using share capital to fund all or part of the purchase price. It is assumed that it is appropriate for the shareholders' resolutions to be passed as written resolutions.
A summary of the core procedures that must also be followed can be found here. Only a private limited company can use capital to fund a purchase of its own shares, public companies must use distributable profits or the proceeds of a fresh share issue.
The directors must make a Directors Statement in the form prescribed by the Companies Act 2006.
The company's auditors must also prepare and issue an Auditor's Report in the form prescribed by the Companies Act 2006.
The shareholders of the company pass a special resolution approving the use of capital to fund the buyback. This is in addition to the special resolution approving the buyback contract. The special resolution must be passed within one week of the Directors' Statement being made, and may be passed at the same time as the special resolution to approve the buyback contract.
A copy of the Directors Statement and Auditors' Report must be sent to all shareholders before or at the same time as the written resolutions are circulated to them.
The same voting restrictions apply in respect of a special resolution to approve the use of capital to purchase shares as apply to voting on the approval of the buyback contract itself.
Notice (in a prescribed form) of the proposed payment out of capital must be published in:
The Directors' Statement and Auditors' Report must be available to inspection by shareholders and creditors for 5 weeks after this publication.
A shareholder (who didn't vote in favour of the buyback) and/or any creditor can make an application to the court objecting to the above noted resolution within the 5 weeks following the resolution being passed. Further notice obligations follow in this event and the court's powers if it accepts the objection are extensive.
Any payment out of capital must be made no earlier than 5 weeks and no later than 7 weeks after the relevant shareholders' resolution is passed.
There are various Companies House filing requirements.