Regulations introduced in 2013 relaxed certain Companies Act 2006 rules that would otherwise apply when a company undertakes a buyback of its shares.
New regulations, which came into force on 6 April 2015, make further changes to clarify some provisions introduced by the 2013 regulations. The new regulations clarify that:
- a private company, if authorised by its articles, can make small buybacks out of capital in a financial year without being subject to payment out of capital rules which usually apply;
- the maximum total price the company can pay under this exemption is the lower of £15,000 and the nominal value of 5 per cent of the company's fully paid share capital at the beginning of the financial year; and
- the accounting treatment of buybacks made under these provisions is consistent with conventional buybacks out of capital.
Where a company is funding a buyback out of capital under the reduced procedural rules introduced in 2013 specifically for employee share schemes, the new Regulations clarify the timing between surrender of the shares and payment for them.