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Companies Act 2006

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This is the original version (as it was originally enacted).

Chapter 3Redeemable shares

684Power of limited company to issue redeemable shares

(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.

685Terms and manner of redemption

(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.

686Payment for redeemable shares

(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.

687Financing of 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).

688Redeemed shares treated as cancelled

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.

689Notice to registrar of redemption

(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.

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