GENERAL CORPORATE

Share buybacks – 6 April 2015

Provisions in the Companies Act 2006 governing the authorisation and financing of share buybacks will be amended from 6 April 2015. Final form regulations have now been published which, amongst other things:

  • make clear that a private company wishing to buyback small quantities of shares out of capital, can do so using the de minimis exemption introduced in 2013, up to an aggregate purchase price in a financial year of the lower of£15,000 or the nominal value of 5 per cent of its fully paid share capital calculated at the beginning of the financial year. Previously it was unclear how to determine the “value of 5 per cent of its share capital”;
  • remove the ability to hold shares in treasury when they are bought back under the de minimis provisions described above;
  • clarify that a buyback under the de minimis provisions should be accounted for in the same way as other buybacks out of capital; and
  • remove the requirement to provide a statement of capital in circumstances where it would replicate one already delivered.

Impact – the revisions bring welcome clarity to changes to the buyback regime for private companies introduced by the Companies Act 2006 (Amendment of Part 18) Regulations 2013  (SI  2013/999).

Background - The Nuttall Review on Employee Ownership found that companies seeking to employ direct share ownership faced company law challenges associated with buying back shares. The 2013 Regulations were intended to make it easier for private companies to, amongst other things, authorise and finance a buyback.

The Small Business, Enterprise and Employment Bill (the Bill) – revised version published

The Bill was reprinted yesterday, containing all agreed amendments made at the Report stage in the House of Lords. No substantive amendments have been made to the provisions governing key proposed company law changes (detailed below).

A small amendment has been made to the definition of a limited partner. The definition of a “limited partner” was previously restricted to a limited partner in a limited partnership registered under the Limited Partnerships Act 1907. It has now been extended to incorporate a foreign limited partner. The definition is relevant when considering whether a limited partner satisfies certain of the conditions for being a person with significant control of a company. Only those limited partners with an economic interest in more than 25 per cent of the limited partnership need to be disclosed (unless they otherwise have the right to exercise, or actually exercise, significant influence or control).

BIS recently launched two surveys in relation to the Bill. The surveys are intended to assist BIS with determining:

  • the level of fee that a company can charge for copies of its PSC register (its register of persons with significant influence or control). The fee model proposed is broadly similar to the current model for inspection of other company registers, such as the register of members (shareholders); and
  • its approach towards people who may be at serious risk of physical harm if their details are publicly disclosed on a PSC register.

The Bill appears to be on track to receive Royal Assent this spring, having just completed its report stage in the House of Lords. It now moves to its third reading in the Lords scheduled for 17 March.

Background - The Bill covers a number of company law changes including:

  • requiring UK companies (other than those within DTR5) to keep a register of individuals with “significant control” (the PSC register). The PSC register must be made freely available to the public. The test for “significant control” is met if an individual, either alone or with others, meets one or more conditions. The conditions broadly are that they hold more than 25 per cent of a company’s shares or voting rights (either directly or indirectly); or can appoint or
  • remove the majority of the board; or have the right to, or do, exercise significant influence or control over the company;
  • requiring all directors to be natural persons. Existing companies will have 12 months to comply. The Bill does not set out any exemptions to that requirement although does provide for exemptions to be made by regulation;
  • the abolition of bearer shares;
  • the abolition of annual returns, to be replaced with the requirement to make an annual confirmation statement; and
  • allowing companies to keep certain public registers instead of statutory books.