• Chapter 4 Chapter 4 Purchase Of Own Shares

    • General Provisions

      • 629. Power of limited company to purchase own shares

        (1) A limited company having a share capital may purchase its own shares (including any redeemable shares), subject to-
        (a) the following provisions of this Chapter, and
        (b) any restriction or prohibition in the company’s articles.
        (2) A limited company may not purchase its own shares if as a result of the purchase there would no longer be any issued shares of the company other than redeemable shares or shares held as treasury shares.

      • 630. Payment for purchase of own shares

        (1) A limited company may not purchase its own shares unless they are fully paid.
        (2) Where a limited company purchases its own shares, the shares must be paid for on purchase.
        (3) But subsection (2) does not apply in a case where a private limited company is purchasing shares for the purposes of or pursuant to an employees’ share scheme.

      • 631. Financing of purchase of own shares

        (1) A private limited company may purchase its own shares-
        (a) out of capital in accordance with Chapter 5, and
        (b) with cash (if authorised to do so by its articles) up to an amount in a financial year not exceeding the lower of-
        (i) 25,000 US dollars, or
        (ii) the value of 5% of its share capital.
        (2) If the share capital of the company is not denominated in US dollars, the value in US dollars of the share capital shall be calculated for the purposes of subsection 631(1)(b)(ii) at an appropriate spot rate of exchange.
        (3) The rate must be a rate prevailing on a day specified in the resolution authorising the purchase of the shares.
        (4) Subject to subsection (1) -
        (a) a limited company may only purchase its own shares out of-
        (i) distributable profits of the company, or
        (ii) the proceeds of a fresh issue of shares made for the purpose of financing the purchase, and
        (5) This section has effect subject to section 676(4) (terms of purchase enforceable in a winding up).

    • Authority For Purchase Of Own Shares

      • 632. Authority for purchase of own shares

        (1) A limited company may only purchase its own shares-
        (a) by an off-market purchase, authorised in accordance with section 633 or in pursuance of a contract approved in advance in accordance with section 634,
        (b) by a market purchase, authorised in accordance with section 641.
        (2) A purchase is “off-market” if the shares either-
        (a) are purchased otherwise than on a recognised investment exchange, or
        (b) are purchased on a recognised investment exchange but are not subject to a marketing arrangement on the exchange.
        (3) For this purpose a company’s shares are subject to a marketing arrangement on a recognised investment exchange if the company has been afforded facilities for dealings in the shares to take place on the exchange-
        (i) without prior permission for individual transactions from the authority governing that investment exchange, and
        (ii) without limit as to the time during which those facilities are to be available.
        (4) A purchase is a “market purchase” if it is made on a recognised investment exchange and is not an off-market purchase by virtue of subsection 632(2)(b).
        (5) In this section ”recognised investment exchange” means an investment exchange so determined in rules made by the Board.

      • 633. Authority for off-market purchase for the purposes of or pursuant to an employees’ share scheme

        (1) A company may make an off-market purchase of its own shares for the purposes of or pursuant to an employees’ share scheme if the purchase has first been authorised by a resolution of the company under this section.
        (2) That authority-
        (a) may be general or limited to the purchase of shares of a particular class or description, and
        (b) may be unconditional or subject to conditions.
        (3) The authority must-
        (a) specify the maximum number of shares authorised to be acquired, and
        (b) determine both the maximum and minimum prices that may be paid for the shares.
        (4) The authority may be varied, revoked or from time to time renewed by a resolution of the company.
        (5) A resolution conferring, varying or renewing authority must specify a date on which it is to expire, which must not be later than five years after the date on which the resolution is passed.
        (6) A company may make a purchase of its own shares after the expiry of the time limit specified if-
        (a) the contract of purchase was concluded before the authority expired, and
        (b) the terms of the authority permitted the company to make a contract of purchase that would or might be executed wholly or partly after its expiration.
        (7) A resolution to confer or vary authority under this section may determine the maximum or minimum price for purchase by-
        (a) specifying a particular sum, or
        (b) providing a basis or formula for calculating the amount of the price (but without reference to any person’s discretion or opinion).
        (8) Chapter 3 of Part 3 (resolutions affecting a company’s constitution) applies to a resolution under this section.

    • Authority For Off-market Purchase

      • 634. Authority for off-market purchase

        (1) Subject to section 633, a company may only make an off-market purchase of its own shares in pursuance of a contract approved prior to the purchase in accordance with this section.
        (2) Either-
        (a) the terms of the contract must be authorised by a resolution of the company before the contract is entered into, or
        (b) the contract must provide that no shares may be purchased in pursuance of the contract until its terms have been authorised by a resolution of the company.
        (3) The contract may be a contract, entered into by the company and relating to shares in the company, that does not amount to a contract to purchase the shares but under which the company may (subject to any conditions) become entitled or obliged to purchase the shares.
        (4) The authority conferred by a resolution under this section may be varied, revoked or from time to time renewed by a resolution of the company.
        (5) In the case of a public company a resolution conferring, varying or renewing authority must specify a date on which the authority is to expire, which must not be later than five years after the date on which the resolution is passed.
        (6) A resolution conferring, varying, revoking or renewing authority under this section is subject to-
        (a) section 635 (exercise of voting rights), and
        (b) section 636 (disclosure of details of contract).

      • 635. Resolution authorising off-market purchase: exercise of voting rights

        (1) This section applies to a resolution to confer, vary, revoke or renew authority for the purposes of section 634 (authority for off-market purchase of own shares).
        (2) Where the resolution is proposed as a written resolution, a member who holds shares to which the resolution relates is not an eligible member.
        (3) Where the resolution is proposed at a meeting of the company, it is not effective if-
        (a) any member of the company holding shares to which the resolution relates exercises the voting rights carried by any of those shares in voting on the resolution, and
        (b) the resolution would not have been passed if he had not done so.
        (4) For this purpose-
        (a) a member who holds shares to which the resolution relates is regarded as exercising the voting rights carried by those shares not only if he votes in respect of them on a poll on the question whether the resolution shall be passed, but also if he votes on the resolution otherwise than on a poll,
        (b) any member of the company may demand a poll on that question,
        (c) a vote and a demand for a poll by a person as proxy for a member are the same respectively as a vote and a demand by the member.

      • 636. Resolution authorising off-market purchase: disclosure of details of contract

        (1) This section applies in relation to a resolution to confer, vary, revoke or renew authority for the purposes of section 634 (authority for off-market purchase of own shares).
        (2) A copy of the contract (if it is in writing) or a memorandum setting out its terms (if it is not) must be made available to members-
        (a) in the case of a written resolution, by being sent or submitted to every eligible member at or before the time at which the proposed resolution is sent or submitted to him,
        (b) in the case of a resolution at a meeting, by being made available for inspection by members of the company both-
        (i) at the company’s registered office for not less than 15 days ending with the date of the meeting, and
        (ii) at the meeting itself.
        (3) A memorandum of contract terms so made available must include the names of the members holding shares to which the contract relates.
        (4) A copy of the contract so made available must have annexed to it a written memorandum specifying such of those names as do not appear in the contract itself.
        (5) The resolution is not validly passed if the requirements of this section are not complied with.

      • 637. Variation of contract for off-market purchase

        (1) A company may only agree to a variation of a contract authorised under section 634 (authority for off-market purchase) if the variation is approved in advance in accordance with this section.
        (2) The terms of the variation must be authorised by a resolution of the company before it is agreed to.
        (3) That authority may be varied, revoked or from time to time renewed by a resolution of the company.
        (4) In the case of a public company a resolution conferring, varying or renewing authority must specify a date on which the authority is to expire, which must not be later than five years after the date on which the resolution is passed.
        (5) A resolution conferring, varying, revoking or renewing authority under this section is subject to-
        (a) section 638 (exercise of voting rights), and
        (b) section 639 (disclosure of details of variation).

      • 638. Resolution authorising variation: exercise of voting rights

        (1) This section applies to a resolution to confer, vary, revoke or renew authority for the purposes of section 637 (variation of contract for off-market purchase of own shares).
        (2) Where the resolution is proposed as a written resolution, a member who holds shares to which the resolution relates is not an eligible member.
        (3) Where the resolution is proposed at a meeting of the company, it is not effective if-
        (a) any member of the company holding shares to which the resolution relates exercises the voting rights carried by any of those shares in voting on the resolution, and
        (b) the resolution would not have been passed if he had not done so.
        (4) For this purpose-
        (a) a member who holds shares to which the resolution relates is regarded as exercising the voting rights carried by those shares not only if he votes in respect of them on a poll on the question whether the resolution shall be passed, but also if he votes on the resolution otherwise than on a poll,
        (b) any member of the company may demand a poll on that question,
        (c) a vote and a demand for a poll by a person as proxy for a member are the same respectively as a vote and a demand by the member.

      • 639. Resolution authorising variation: disclosure of details of variation

        (1) This section applies in relation to a resolution under section 637 (variation of contract for off-market purchase of own shares).
        (2) A copy of the proposed variation (if it is in writing) or a written memorandum giving details of the proposed variation (if it is not) must be made available to members-
        (a) in the case of a written resolution, by being sent or submitted to every eligible member at or before the time at which the proposed resolution is sent or submitted to him,
        (b) in the case of a resolution at a meeting, by being made available for inspection by members of the company both-
        (i) at the company’s registered office for not less than 15 days ending with the date of the meeting, and
        (ii) at the meeting itself.
        (3) There must also be made available as mentioned in subsection (2) a copy of the original contract or, as the case may be, a memorandum of its terms, together with any variations previously made.
        (4) A memorandum of the proposed variation so made available must include the names of the members holding shares to which the variation relates.
        (5) A copy of the proposed variation so made available must have annexed to it a written memorandum specifying such of those names as do not appear in the variation itself.
        (6) The resolution is not validly passed if the requirements of this section are not complied with.

      • 640. Release of company’s rights under contract for off-market purchase

        (1) An agreement by a company to release its rights under a contract approved under section 634 (authority for off-market purchase) is void unless the terms of the release agreement are approved in advance in accordance with this section.
        (2) The terms of the proposed agreement must be authorised by a resolution of the company before the agreement is entered into.
        (3) That authority may be varied, revoked or from time to time renewed by a resolution of the company.
        (4) In the case of a public company a resolution conferring, varying or renewing authority must specify a date on which the authority is to expire, which must not be later than five years after the date on which the resolution is passed.
        (5) The provisions of-
        (a) section 638 (exercise of voting rights), and
        (b) section 639 (disclosure of details of variation),
        apply to a resolution authorising a proposed release agreement as they apply to a resolution authorising a proposed variation.

    • Authority For Market Purchase

      • 641. Authority for market purchase

        (1) A company may only make a market purchase of its own shares if the purchase has first been authorised by a resolution of the company.
        (2) That authority-
        (a) may be general or limited to the purchase of shares of a particular class or description, and
        (b) may be unconditional or subject to conditions.
        (3) The authority must-
        (a) specify the maximum number of shares authorised to be acquired, and
        (b) determine both the maximum and minimum prices that may be paid for the shares.
        (4) The authority may be varied, revoked or from time to time renewed by a resolution of the company.
        (5) A resolution conferring, varying or renewing authority must specify a date on which it is to expire, which must not be later than five years after the date on which the resolution is passed.
        (6) A company may make a purchase of its own shares after the expiry of the time limit specified if-
        (a) the contract of purchase was concluded before the authority expired, and
        (b) the terms of the authority permitted the company to make a contract of purchase that would or might be executed wholly or partly after its expiration.
        (7) A resolution to confer or vary authority under this section may determine either or both the maximum and minimum price for purchase by-
        (a) specifying a particular sum, or
        (b) providing a basis or formula for calculating the amount of the price (but without reference to any person’s discretion or opinion).
        (8) Chapter 3 of Part 3 (resolutions affecting a company’s constitution) applies to a resolution under this section.

      • 642. Copy of contract or memorandum to be available for inspection

        (1) This section applies where a company has entered into-
        (a) a contract approved under section 634 (authority for contract for offmarket purchase), or
        (b) a contract for a purchase authorised under section 641 (authorisation of market purchase).
        (2) The company must keep available for inspection-
        (a) a copy of the contract, or
        (b) if the contract is not in writing, a written memorandum setting out its terms.
        (3) The copy or memorandum must be kept available for inspection from the conclusion of the contract until the end of the period of ten years beginning with-
        (a) the date on which the purchase of all the shares in pursuance of the contract is completed, or
        (b) the date on which the contract otherwise determines.
        (4) The copy or memorandum must be kept available for inspection-
        (a) at the company’s registered office, or
        (b) at a place specified in rules made by the Board under section 996 (rules about where certain company records to be kept available for inspection).
        (5) The company must give notice to the Registrar-
        (a) of the place at which the copy or memorandum is kept available for inspection, and
        (b) of any change in that place,
        unless it has at all times been kept at the company’s registered office, or unless it is a restricted scope company.
        (6) Every copy or memorandum required to be kept under this section must be kept open to inspection without charge-
        (a) by any member of the company, and
        (b) in the case of a public company, by any other person.
        (7) The provisions of this section apply to a variation of a contract as they apply to the original contract.

      • 643. Enforcement of right to inspect copy or memorandum

        (1) If default is made in complying with section 642(2), (3) or (4) or default is made for 14 days in complying with section 642(5), or an inspection required under section 642(6) is refused, a contravention of these Regulations is committed by-
        (a) the company, and
        (b) every officer of the company who is in default.
        (2) A person who commits a contravention under this section is liable to a level 2 fine.
        (3) In the case of refusal of an inspection required under section 642(6) the Court may by order compel an immediate inspection.

      • 644. No assignment of company’s right to purchase own shares

        The rights of a company under a contract authorised under-
        (a) section 633 (authority for off-market purchase for the purposes of or pursuant to an employees’ share scheme),
        (b) section 634 (authority for off-market purchase), or
        (c) section 641 (authority for market purchase)
        are not capable of being assigned.

      • 645. Payments apart from purchase price to be made out of distributable profits

        (1) A payment made by a company in consideration of-
        (a) acquiring any right with respect to the purchase of its own shares in pursuance of a contingent purchase contract approved under section 634 (authority for off-market purchase),
        (b) the variation of any contract approved under that section, or
        (c) the release of any of the company’s obligations with respect to the purchase of any of its own shares under a contract-
        (i) approved under section 634 (authority for off-market purchase), or
        (ii) authorised under section 641 (authority for market purchase),
        must be made out of the company’s distributable profits.
        (2) If this requirement is not met in relation to a contract, then-
        (a) in a case within subsection 645(1)(a), no purchase by the company of its own shares in pursuance of that contract may be made under this Chapter,
        (b) in a case within subsection 645(1)(b), no such purchase following the variation may be made under this Chapter,
        (c) in a case within subsection 645(1)(c), the purported release is void.

      • 646. Treatment of shares purchased

        Where a limited company makes a purchase of its own shares in accordance with this Chapter, then-
        (a) if section 666(treasury shares) applies, the shares may be held and dealt with in accordance with Chapter 6,
        (b) if that section does not apply-
        (i) the shares are treated as cancelled, and
        (ii) the amount of the company’s issued share capital is diminished accordingly by the issue price of the shares cancelled.

      • 647. Return to Registrar of purchase of own shares

        (1) Where a company purchases shares under this Chapter, it must deliver a return to the Registrar within the period of one month beginning with the date on which the shares are delivered to it, but not if it is a restricted scope company in which case this section shall not apply.
        (2) The return must distinguish-
        (a) shares in relation to which section 666 (treasury shares) applies and shares in relation to which that section does not apply, and
        (b) shares in relation to which that section applies-
        (i) that are cancelled forthwith (under section 670 (cancellation of treasury shares)), and
        (ii) that are not so cancelled.
        (3) The return must state, with respect to shares of each class purchased-
        (a) the number and aggregate price of the shares purchased, and
        (b) the date on which they were delivered to the company.
        (4) In the case of a public company the return must also state-
        (a) the aggregate amount paid by the company for the shares, and
        (b) the maximum and minimum prices paid in respect of shares of each class purchased.
        (5) Particulars of shares delivered to the company on different dates and under different contracts may be included in a single return.
        In such a case the amount required to be stated under subsection 647(4)(a) is the aggregate amount paid by the company for all the shares to which the return relates.
        (6) If default is made in complying with this section a contravention of these Regulations is committed by every officer of the company who is in default.
        (7) A person who commits a contravention under this section is liable to a level 1 fine.

      • 648. Notice to Registrar of cancellation of shares

        (1) If on the purchase by a company of any of its own shares in accordance with this Part-
        (a) section 666 (treasury shares) does not apply (so that the shares are treated as cancelled), or
        (b) that section applies but the shares are cancelled forthwith (under section 670 (cancellation of treasury shares)),
        the company must give notice of cancellation to the Registrar within the period of one month beginning with the date on which the shares are delivered to it specifying the shares cancelled
        (2) The notice must be accompanied by a statement of capital.
        (3) The statement of capital must state with respect to the company’s share capital immediately following the cancellation-
        (a) the total number of shares of the company,
        (b) the aggregate issue price of those shares,
        (c) for each class of shares-
        (i) prescribed particulars of the rights attached to the shares,
        (ii) the total number of shares of that class, and
        (iii) the aggregate issue price of shares of that class, and
        (d) the amount paid up and the amount (if any) unpaid on each share.
        (4) If default is made in complying with this section, a contravention of these Regulations is committed by-
        (a) the company, and
        (b) every officer of the company who is in default.
        (5) A person who commits a contravention of this section is liable to a level 1 fine.
        (6) This section does not apply to restricted scope companies.