Redeemable shares Definition

GLOSSARY

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What does Redeemable shares mean?

Pursuant to CA 2006, ss 684–686, any limited company having a share capital may issue redeemable shares of any class. However, a public company may only issue redeemable shares if it is authorised to do so by its articles of association. A private company’s articles may exclude or restrict the issue of redeemable shares but need not expressly authorise it. The model articles provide a right for both a private company and a public company to issue redeemable shares. The terms, conditions and manner of redemption may be determined by the directors (if they are authorised to do so), by the articles of association or by a resolution of the company. The resolution may be an ordinary resolution even though it amends the company’s articles of association. Redeemable shares in a limited company may not be redeemed unless they are fully paid.

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Key differences between private and public companies—checklist

Key differences between private and public companies—checklist When incorporating a limited company, consideration should be given as to whether the company should be public or private. The Companies Act 2006 (CA 2006) takes a 'think small first' approach and assumes that private companies are smaller than public companies. This means that the CA 2006 generally applies the basic, more simple requirements and procedures to private companies and imposes further additional requirements and procedures on public companies. The following table summarises some of the key differences in the requirements and procedures applying to private and public (unlisted) limited companies. Requirement/procedure Private company Public company Reference Minimum number of directors 1 2 CA 2006, s 154 Requirement for a company secretary No Yes CA 2006, ss 270, 271 Company secretary—requirement for qualifications No Yes CA 2006, s 273 Subscriber shares—requirement to be a quarter paid up in cash No Yes CA 2006, ss 583–584, 586 Requirement for authorised minimum share capital (currently £50,000 or the prescribed Euro equivalent, currently €56,700), of...

Key UK tax considerations for returning value to shareholders—comparative table

Key UK tax considerations for returning value to shareholders—comparative table FORTHCOMING CHANGE: At Autumn Budget 2024, the Labour government confirmed that it will proceed with the former Conservative administration's plans to abolish the remittance basis of taxation for non-UK domiciled individuals and replace it with a residence-based regime, to commence on 6 April 2025. The government also confirmed its intention to move to a residence-based regime for inheritance tax. The changes will also affect the rules determining excluded property status, the abolition of protected settlements status of offshore trusts, and changes to overseas workday relief. For information on these changes, including draft legislation published with Autumn Budget 2024, see Practice Note: The abolition of the remittance basis of taxation from 2025–26, News Analysis: Autumn Budget 2024—Private Client analysis—International, News Analysis: Autumn Budget 2024—reforming the taxation of non-doms, Autumn Budget 2024 (paras 2.56 and 5.51), OOTLAR (para 1.3) and TIIN: Reforming the taxation of non-UK domiciled individuals.. The table below sets out different methods by which a company can return value...

Capital gains—intra-group asset transfers

Capital gains—intra-group asset transfers Companies which form a group for capital gains purposes are able to transfer assets to one another free of corporation tax on chargeable gains. Each company is a separate legal person for tax purposes meaning that, in the absence of a special rule, an intra-group transfer of a capital asset between companies would be a disposal and would trigger chargeable capital gains (or allowable losses). Acquisitions and disposals taking place between connected persons (a term which includes companies in the same tax group) are normally treated as taking place otherwise than at arm's length with the result that, without the grouping rules, the consideration for the transaction would be deemed to be equal to the market value of the asset transferred irrespective of any actual consideration paid (see Practice Note: Capital gains for connected persons). Special provisions are also included in various other areas of tax law (eg in particular, stamp taxes) to ensure that intra-group transfers of assets do not trigger any...

Tax consequences of share buybacks—calculating the income capital split

Tax consequences of share buybacks—calculating the income capital split From a shareholder’s perspective, when a company buys back its own shares, either directly or through an intermediary acting as agent for the company (whether on- or off-market), the purchase normally involves two elements for tax purposes: • an income distribution by the company to the shareholder to the extent the buyback proceeds exceed the amount the shareholder originally subscribed for the shares, and • a disposal of shares by the shareholder for chargeable gains purposes, with the disposal proceeds being the amount of cash received less any amount chargeable to income or corporation tax In order to be able to calculate precisely how a shareholder will be taxed on a share buyback, it is therefore necessary to determine how much of the amount paid is treated as an income distribution. Note that this calculation is complicated where there have been prior bonus issues of shares by the company (for more on this, see below). This Practice...

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Directors’ statement—payment out of capital for a redemption of shares

Directors’ statement—payment out of capital for a redemption of shares Company number: [insert number] [insert company name] Limited Payment out of capital to redeem shares in the company Directors’ statement We, the undersigned, [enter name of director] of [enter address] [enter name of director] of [enter address] [enter name of director] of [enter address] being all the directors for the time being of the Company, hereby state in accordance with section 714 of the Companies Act 2006 that the amount of the permissible capital payment for [insert number] [redeemable] shares of £[insert nominal value] proposed in the [Notice of General Meeting dated [insert date] OR Written Resolution dated [insert date]] to be redeemed by the Company is £[insert amount]. We also confirm that, having made full inquiry into the affairs and prospects of the Company, we have formed the opinion: 1 as regards the Company’s initial situation immediately following the date on which the payment out of capital is proposed to be made, that there...

Ordinary resolution authorising directors to determine the terms, conditions and manner of a redemption of shares

Ordinary resolution authorising directors to determine the terms, conditions and manner of a redemption of shares Ordinary resolution That

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What procedure must be followed to redeem shares where a company's articles make the process subject to the now repealed Companies Act 1985 provisions?

What procedure must be followed to redeem shares where a company's articles make the process subject to the now repealed Companies Act 1985 provisions? As this question indicates, the redemption provisions under the Companies Act 1985 (CA 1985) were repealed by the Companies Act 2006 (CA 2006). However, that is not really the point here. CA 2006 did not effect changes to the articles of any given company in this regard. It enabled the making of such changes, but it did not of itself make such changes. At any given time, the affairs of the company must be conducted in accordance with its articles (CA 2006, s 33, re-enacting CA 1985, s 14, the provision having been in successive Company Acts since at least 1948). So, although it is not correct to say that CA 1985 still applies, the articles do still apply. If, as we are told, the articles of this company require the process to comply with the rules set out in CA 1985, then...

Can a private company be incorporated with only redeemable shares as its share capital?

Can a private company be incorporated with only redeemable shares as its share capital? Pursuant to the Companies Act 2006 (CA 2006), a limited company having a share capital may issue redeemable shares of any class. However, a public company may only issue redeemable shares if it is authorised to do so by its articles of association. A private company’s articles may exclude or restrict the issue of redeemable shares, but need not expressly authorise it. For further information on the issue of redeemable shares, see Practice Note: Issue of redeemable shares. The authority for a limited company to issue redeemable shares is set out in CA 2006, s 684. CA 2006, s 684(4) specifies that redeemable

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Private Client weekly highlights—7 July 2022

This week’s edition of Private Client highlights includes: (1) Draft legislation for Finance Bill 2023 will be published on 20 July 2022; (2) Updated guidance from HMRC on registering trusts where the settlor is deceased; (3) An NHS Foundation Trust v G, in which the Court of Protection granted injunctive relief against the family of a vulnerable young woman in order to establish clear boundaries and manage intimidating behaviour; (4) HMRC increases rate of interest payable on late payments of IHT to 3.75%; (5) Da Silva v Heselton, in which the Court of Appeal upheld the view that a trustee or executor can rely upon the charging clause in the Will to charge for work done or time spent in the administration of the estate only if that work falls within the scope of their profession or business in question; (6) HM Treasury consults on narrowing scope of sovereign immunity from direct taxation; and (7) DWP launches a call for evidence seeking views on how it can support pension scheme...

EBA publishes updates on CET1 capital instruments

The European Banking Authority (EBA) has published an updated list of Common Equity Tier 1 (CET1) instruments of EU institutions, together with an updated CET1 report, which includes information on the underlying objectives of the monitoring as well as on the consequences of including or excluding instruments in or from the CET1 list.

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