Share buybacks are a common strategy used by businesses seeking to return shares to the business. Whether that’s to increase share prices or to secure shares from a departing shareholder, share buybacks are an important part of running a business.
However, share buybacks are deceptively complex and there are specific steps to be followed (and to be carried out after the buyback). Aside from claiming time and resource, a poorly managed share buyback can result in a null and void transaction and an offence being committed by the company and every director. We work with companies to ensure their share buyback is a success.
Why a share buyback is used
Departing shareholders
Many shareholders will in fact be employees of the business, but what happens when a shareholder leaves? Do they take their shares with them? A share buyback allows the business to reclaim shares from departing shareholders, allowing for the distribution of shares to future hires.
Retain control
When a shareholder is exiting there is often no market for those shares (i.e., they can’t find a buyer) and also the company (its existing shareholders) will likely want to retain control. However, the existing shareholders may not be able to afford to finance the purchase – which is where a share buyback comes in.
Increase share price
At times, a share buyback is used to boost the share price of a business - thereby boosting the return for existing shareholders.
Articles of Association
Articles of Association can be thought of as the governing constitution of a business. However, when it comes to share buybacks, you’ll need to ensure that your Articles of Association do not prohibit the buyback or permit the buyback - depending on the context of how the buyback is being financed.
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About us
We’re the trusted partner of countless fast-growth companies seeking to leverage shares. From tax advantageous schemes to incentivising growing teams, we help you address the options available.
