The government has published a revised draft of regulations in respect of the buyback of shares relating to employee share ownership arrangements.
The first draft of the regulations was published in October 2012 as part of the government consultation on the implementation of the Nuttall Review and in February 2013, the government published its response to the consultation.
The main substantive amendments made to the October version of the draft regulations are limited to the changes that are necessary to reflect the government’s position as summarised in the February response, including:
•A provision amending section 692(1) of the Companies Act 2006 to allow private companies to buy back shares using small amounts of cash (not exceeding the lower of £15,000 or 5% of share capital in any financial year) that does not have to be identified as distributable reserves, where authorised to do so by its articles (regulation 4);
•A provision inserting a new section 693A in the CA 2006 extending the ability to authorise in advance multiple share buyback contracts to private companies, where the buyback is connected with an employees’ share scheme (regulation 7);
•A provision inserting new sections 720A and 720B in the CA 2006 allowing private companies to finance buybacks (for the purposes of, or pursuant to, an employees’ share scheme) out of capital, subject to the signing of a solvency statement and special resolution and provided that the payment out of capital is made no earlier than 5 weeks and no later than 7 weeks after the relevant shares are surrendered (regulations 12 and 13).
The draft regulations are intended to enter into force on 30 April 2013.
For further advice please contact one of our Company & Commercial lawyers at email@example.com.