How to handle purchase of own shares

Where a company purchases its own shares, it is commonly referred to as a share buyback. For a company to buy back its shares it must follow the procedures set out in Part 18 of the Companies Act 2006. Failure to comply can lead to the buyback being declared invalid. In extreme cases the buyback could be unwound – meaning the repurchased shares would be treated as still in issue and still held by the original shareholder(s). In addition, failure to comply constitutes an offence being committed by the company and every officer in default. An officer in default is liable to a prison term of up to two years or an unlimited fine, or both – so it’s crucial to get this right.

Paula Tallon and Paul Howard writes for Tax Journal