If you are considering: 1. Undertaking a buy-back of own shares; or 2. offering shares to employees under the much-publicised “employee shareholder” proposals, you should read this note.


The government has implemented several key changes making it simpler for a company to buy back its own shares. These include:  Allowing off-market share buy-backs to be authorised by ordinary resolution; Extending the ability to authorise, in advance, multiple share buy-back contracts to private companies, but limited to buy-backs connected with an employees’ share scheme. The current notice periods for displaying resolutions will be retained; Allowing private companies to pay in instalments for shares bought back, but only where the buy-back is for the purposes of, or pursuant to, an employees’ share scheme. Maximum time limits for such payments will not be imposed; Allowing private companies to finance buy-backs (again only for the purposes of, or pursuant to, an employees’ share scheme) out of capital, subject to the signing of a solvency statement and special resolution; Allowing private companies to buy back shares using small amounts of cash (not exceeding the lower of £15,000 or 5% of share capital in any financial year) that do not have to be identified as distributable reserves, where there is provision in the company’s articles to do so. Where there is no provision in the articles, a special resolution of shareholders will be required; Allowing private companies and unlisted public companies to hold shares in treasury on a similar basis to that already permitted for certain public companies. These provisions were implemented on 30 April 2013.


Separately, the Government is currently enacting legislation to implement a new employment status of “employee shareholder” that will be held by existing employees or new recruits who agree to receive shares in exchange for giving up certain employment protections. To the extent that this proposal is taken up by employers, they may also need to buy back shares when employee shareholders leave which is why the proposals mentioned above, relating to company buybacks of shares, are of particular relevance.

For more information please contact Toby Stroh, Head of Druces LLP’s Corporate & Commercial Team and Caroline Cropley, Associate.

This note does not constitute legal advice but is as general guidance only. It is based on the law in force in May 2013.

Share this article:

How can we help?

To find out more about our services, please contact us on: