Office of Public Sector Information
PART 18 continued CHAPTER 2 continued
(1) Neither section 678 nor section 679 prohibits a transaction to which this section applies—
(a) if the company giving the assistance is a private company, or
(b) if the company giving the assistance is a public company and—
(i) the company has net assets that are not reduced by the giving of the assistance, or
(ii) to the extent that those assets are so reduced, the assistance is provided out of distributable profits.
(2) The transactions to which this section applies are—
(a) where the lending of money is part of the ordinary business of the company, the lending of money in the ordinary course of the company’s business;
(b) the provision by the company, in good faith in the interests of the company or its holding company, of financial assistance for the purposes of an employees' share scheme;
(c) the provision of financial assistance by the company for the purposes of or in connection with anything done by the company (or another company in the same group) for the purpose of enabling or facilitating transactions in shares in the first-mentioned company or its holding company between, and involving the acquisition of beneficial ownership of those shares by—
(i) bona fide employees or former employees of that company (or another company in the same group), or
(ii) spouses or civil partners, widows, widowers or surviving civil partners, or minor children or step-children of any such employees or former employees;
(d) the making by the company of loans to persons (other than directors) employed in good faith by the company with a view to enabling those persons to acquire fully paid shares in the company or its holding company to be held by them by way of beneficial ownership.
(3) The references in this section to “net assets” are to the amount by which the aggregate of the company’s assets exceeds the aggregate of its liabilities.
(4) For this purpose—
(a) the amount of both assets and liabilities shall be taken to be as stated in the company’s accounting records immediately before the financial assistance is given, and
(b) “liabilities” includes any amount retained as reasonably necessary for the purpose of providing for a liability the nature of which is clearly defined and that is either likely to be incurred or certain to be incurred but uncertain as to amount or as to the date on which it will arise.
(5) For the purposes of subsection (2)(c) a company is in the same group as another company if it is a holding company or subsidiary of that company or a subsidiary of a holding company of that company.
(1) In this Chapter—
“distributable profits”, in relation to the giving of any financial assistance—
means those profits out of which the company could lawfully make a distribution equal in value to that assistance, and
includes, in a case where the financial assistance consists of or includes, or is treated as arising in consequence of, the sale, transfer or other disposition of a non-cash asset, any profit that, if the company were to make a distribution of that character would be available for that purpose (see section 846); and
“distribution” has the same meaning as in Part 23 (distributions) (see section 829).
(2) In this Chapter—
(a) a reference to a person incurring a liability includes his changing his financial position by making an agreement or arrangement (whether enforceable or unenforceable, and whether made on his own account or with any other person) or by any other means, and
(b) a reference to a company giving financial assistance for the purposes of reducing or discharging a liability incurred by a person for the purpose of the acquisition of shares includes its giving such assistance for the purpose of wholly or partly restoring his financial position to what it was before the acquisition took place.
(1) A limited company having a share capital may issue shares that are to be redeemed or are liable to be redeemed at the option of the company or the shareholder (“redeemable shares”), subject to the following provisions.
(2) The articles of a private limited company may exclude or restrict the issue of redeemable shares.
(3) A public limited company may only issue redeemable shares if it is authorised to do so by its articles.
(4) No redeemable shares may be issued at a time when there are no issued shares of the company that are not redeemable.
(1) The directors of a limited company may determine the terms, conditions and manner of redemption of shares if they are authorised to do so—
(a) by the company’s articles, or
(b) by a resolution of the company.
(2) A resolution under subsection (1)(b) may be an ordinary resolution, even though it amends the company’s articles.
(3) Where the directors are authorised under subsection (1) to determine the terms, conditions and manner of redemption of shares—
(a) they must do so before the shares are allotted, and
(b) any obligation of the company to state in a statement of capital the rights attached to the shares extends to the terms, conditions and manner of redemption.
(4) Where the directors are not so authorised, the terms, conditions and manner of redemption of any redeemable shares must be stated in the company’s articles.
(1) Redeemable shares in a limited company may not be redeemed unless they are fully paid.
(2) The terms of redemption of shares in a limited company may provide that the amount payable on redemption may, by agreement between the company and the holder of the shares, be paid on a date later than the redemption date.
(3) Unless redeemed in accordance with a provision authorised by subsection (2), the shares must be paid for on redemption.
(1) A private limited company may redeem redeemable shares out of capital in accordance with Chapter 5.
(2) Subject to that, redeemable shares in a limited company may only be redeemed out of—
(a) distributable profits of the company, or
(b) the proceeds of a fresh issue of shares made for the purposes of the redemption.
(3) Any premium payable on redemption of shares in a limited company must be paid out of distributable profits of the company, subject to the following provision.
(4) If the redeemable shares were issued at a premium, any premium payable on their redemption may be paid out of the proceeds of a fresh issue of shares made for the purposes of the redemption, up to an amount equal to—
(a) the aggregate of the premiums received by the company on the issue of the shares redeemed, or
(b) the current amount of the company’s share premium account (including any sum transferred to that account in respect of premiums on the new shares),
whichever is the less.
(5) The amount of the company’s share premium account is reduced by a sum corresponding (or by sums in the aggregate corresponding) to the amount of any payment made under subsection (4).
(6) This section is subject to section 735(4) (terms of redemption enforceable in a winding up).
Where shares in a limited company are redeemed—
(a) the shares are treated as cancelled, and
(b) the amount of the company’s issued share capital is diminished accordingly by the nominal value of the shares redeemed.
(1) If a limited company redeems any redeemable shares it must within one month after doing so give notice to the registrar, specifying the shares redeemed.
(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 redemption—
(a) the total number of shares of the company,
(b) the aggregate nominal value 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 nominal value of shares of that class, and
(d) the amount paid up and the amount (if any) unpaid on each share (whether on account of the nominal value of the share or by way of premium).
(4) If default is made in complying with this section, an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(5) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.
(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.
(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.
(1) A private limited company may purchase its own shares out of capital in accordance with Chapter 5.
(2) Subject to that—
(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
(b) any premium payable on the purchase by a limited company of its own shares must be paid out of distributable profits of the company, subject to subsection (3).
(3) If the shares to be purchased were issued at a premium, any premium payable on their purchase by the company may be paid out of the proceeds of a fresh issue of shares made for the purpose of financing the purchase, up to an amount equal to—
(a) the aggregate of the premiums received by the company on the issue of the shares purchased, or
(b) the current amount of the company’s share premium account (including any sum transferred to that account in respect of premiums on the new shares),
whichever is the less.
(4) The amount of the company’s share premium account is reduced by a sum corresponding (or by sums in the aggregate corresponding) to the amount of any payment made under subsection (3).
(5) This section has effect subject to section 735(4) (terms of purchase enforceable in a winding up).
(1) A limited company may only purchase its own shares—
(a) by an off-market purchase, in pursuance of a contract approved in advance in accordance with section 694;
(b) by a market purchase, authorised in accordance with section 701.
(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—
(a) they are listed under Part 6 of the Financial Services and Markets Act 2000 (c. 8), or
(b) 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 (2)(b).
(5) In this section “recognised investment exchange” means a recognised investment exchange (within the meaning of Part 18 of the Financial Services and Markets Act 2000) other than an overseas exchange (within the meaning of that Part).
(1) 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 special 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 special 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 special 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 18 months after the date on which the resolution is passed.
(6) A resolution conferring, varying, revoking or renewing authority under this section is subject to—
section 695 (exercise of voting rights), and
section 696 (disclosure of details of contract).
(1) This section applies to a resolution to confer, vary, revoke or renew authority for the purposes of section 694 (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.
(1) This section applies in relation to a resolution to confer, vary, revoke or renew authority for the purposes of section 694 (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
(1) A company may only agree to a variation of a contract authorised under section 694 (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 special resolution of the company before it is agreed to.
(3) That authority may be varied, revoked or from time to time renewed by a special 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 18 months after the date on which the resolution is passed.
(5) A resolution conferring, varying, revoking or renewing authority under this section is subject to—
section 698 (exercise of voting rights), and
section 699 (disclosure of details of variation).
(1) This section applies to a resolution to confer, vary, revoke or renew authority for the purposes of section 697 (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.
(1) This section applies in relation to a resolution under section 697 (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.
(1) An agreement by a company to release its rights under a contract approved under section 694 (authorisation of 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 special 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 special 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 18 months after the date on which the resolution is passed.
(5) The provisions of—
section 698 (exercise of voting rights), and
section 699 (disclosure of details of variation),
apply to a resolution authorising a proposed release agreement as they apply to a resolution authorising a proposed variation.
(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 18 months 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.
(1) This section applies where a company has entered into—
(a) a contract approved under section 694 (authorisation of contract for off-market purchase), or
(b) a contract for a purchase authorised under section 701 (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 regulations under section 1136.
(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.
(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.
(1) If default is made in complying with section 702(2), (3) or (4) or default is made for 14 days in complying with section 702(5), or an inspection required under section 702(6) is refused, an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(2) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.
(3) In the case of refusal of an inspection required under section 702(6) the court may by order compel an immediate inspection.
The rights of a company under a contract authorised under—
(a) section 694 (authority for off-market purchase), or
(b) section 701 (authority for market purchase)
are not capable of being assigned.
(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 694 (authorisation of 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 694, or
(ii) authorised under section 701 (authorisation of 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 (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 (1)(b), no such purchase following the variation may be made under this Chapter;
(c) in a case within subsection (1)(c), the purported release is void.
Companies Act 2006