The Government plans to simplify the buyback of shares relating to employee share ownership arrangements.
It has published its response to its consultation relating to implementation of the Nuttall Review recommendations on share buybacks.
In July 2012 the Nuttall Review of Employee Ownership reported on the barriers to the creation and uptake of employee share ownership arrangements and concluded that a number of the provisions in the Companies Act 2006 relating to the buyback of shares were overly burdensome and that those provisions should be simplified.
Under the new proposals the Government intends to:
- Allow off-market share buybacks to be authorised by ordinary resolution;
- Extend the ability to authorise in advance multiple share buyback contracts to private companies, but limited to buybacks connected to an employees’ share scheme. The current notice periods for displaying resolutions will be retained;
- Allow private companies to pay for their shares in instalments (where the buyback is for the purposes of or pursuant to an employees’ share scheme). Maximum time limits for such payments will not be imposed;
- Allow 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;
- 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 there is provision in the company’s articles to do so. Where there is no provision in the articles, special resolution will be required;
- Allow private companies and unlisted public companies to hold shares in treasury on a similar basis as permitted public companies already do.
The proposals are intended to be implemented to come into force during 2013.
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