Issue of redeemable shares

Published by a ��˾��ҹ�� Corporate expert

Practice notes

Issue of redeemable shares

Published by a ��˾��ҹ�� Corporate expert

Practice notes

A limited company having a share capital may issue Redeemable shares. Redeemable shares are a statutory concept contained in the Companies Act 2006 (CA 2006), which includes detailed provisions relating to the terms, manner, financing and timing of their redemption.

A redemption of Shares by a limited company having a share capital will be void unless it is carried out in accordance with CA 2006, Pt 18 (CA 2006, ss 658–737), which sets out the statutory framework within which a limited company is permitted to acquire its own shares. In addition, if such a company purports to redeem shares without complying with CA 2006, Pt 18, an offence is committed by the company and every one of its officers in default.

A person guilty of such an offence is liable:

•
on conviction on indictment, to imprisonment for a term not exceeding two years or a fine (or both), or
•
on summary conviction in England and Wales, to imprisonment for a term not exceeding 12 months, a fine not exceeding the statutory maximum or both

The

Jurisdiction(s):

United Kingdom

Key definition:

Redeemable shares definition

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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