We continue to provide our legal services through the COVID-19 lockdown. Please visit our COVID-19 Hub for legal insights, or contact us directly.
Get in Touch Menu

Clarification of share buyback rules

05 August 2015

The share buyback regulations introduced in 2013 relaxed certain Companies Act 2006 requirements that would otherwise apply when a company undertakes a buyback of its shares.

One of the main changes gave a private company the ability to effect a buyback of shares from cash without the need to be holding distributable reserves. The maximum purchase price for the shares acquired under this relaxed provision in any financial year is however currently limited to the lower of £15,000 and the ‘value of 5% of its share capital’ (the de minimis exemption).

Unfortunately, the 2013 regulations created both legal and accounting uncertainties. On 6 April 2015, new regulations were brought into force to clarify these uncertainties although the use of the de minimis exemption continues to be limited given the financial constraints (2015 regulations).

The 2015 regulations:

  •  clarify that the annual limit for the de minimis exemption is the lower of £15,000 and 5% of the company’s paid up nominal capital as at the beginning of the relevant year;
  •  align the treatment of a purchase under the de minimis exemption with the purchase made out of capital; and
  •  provide that the shares purchased under the de minimis exemption may not be held in treasury.

The Department for Business Innovation and Skills has published a revised version of its guidance explaining the changes now made to the share buyback regime.

This makes clear that as a result of the changes made by the 2015 regulations, the purchase price for a buyback made under the de minimis exemption does not have to be the nominal value of the shares.

The new guidance states that it remains the government’s intention to carry out a full review of the share buyback provisions in 2016, which will include the amendments made by the 2015 regulations.

We will keep you informed of developments.

We're here to help
Sophie Martyn BSc (Hons)
Associate, solicitor
View profile
Sophie Martyn
Related services
Share this article
Resources to help

Related articles

Can a furloughed director fulfil their statutory duties?


The government guidance on the Coronavirus Job Retention Scheme (the “scheme”) confirms that a director who is paid via PAYE can be furloughed. That same guidance also states that the…

Helen Howes LLM
Trainee solicitor

COVID-19 and filing obligations - the latest from Companies House


The current situation of the coronavirus (COVID-19) pandemic makes it difficult for companies to remain compliant with their filing obligations. In this article, we explain some of the key changes…

Helen Howes LLM
Trainee solicitor

Corporate transactions: Getting back to business


The current coronavirus lockdown has inevitably resulted in numerous transactions and commercial initiatives being put on hold or, worse, aborted. This includes company and business acquisitions and sales and commercial…

Paul Symes-Thompson MA (Cantab)
Contact us