Corporate Law – Focus On: Share Buybacks

28 February 2022
1 minute

The Corporate team at MKB Law have recently completed a share buyback for a company that own several pharmacies within Northern Ireland

This process is typically used when one or several members of the company wish to exit and dispose of their shareholding without transferring it to a third party or to another member directly.

At completion, the share percentages and voting rights of the other shareholders is likely to be affected, as after the company has purchased its own shares, it will be normal to proceed to its cancellation and therefore changing the share capital percentages accordingly.

When dealing with the purchase of own shares, it is very important to ascertain whether the consideration is going to be paid through distributable profits or out of capital, as depending on the source of finance the procedures and legal implications are different.

In the case of a share buyback funded by distributable profits, the company does not need to seek prior tax clearance from HMRC and the process can be completed in a short period of time. However, if the company does not have enough distributable profits, then clearance from HMRC must be sought in advance and therefore the timeline would be subject to more strict procedures.

For further information on the above, please contact a member of our Corporate Law department.

This article is for general guidance only and should not be regarded as a substitute for professional legal advice.

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