Case study: Corporate and Commercial team advises on several share buybacks
Our corporate and commercial solicitors recently advised organisations within the childcare, software development and building development industries on their share buybacks.
What is a share buyback?
A share buyback involves a company repurchasing its own shares, reducing the number of outstanding shares by using distributable profits or capital to buy them back.
The most common reasons companies buy back shares are:
- To provide an exit route to shareholders
- To consolidate the organisation’s structure
- To reward employees under an incentive scheme
- To improve financial ratios
- To release capital
Recent share buyback cases
In these recent share buybacks that our corporate and commercial lawyers advised on, the sellers were stakeholders who were retiring from the business or who had already ceased to be involved in the business and wished to release the capital they had invested.
For each case, our solicitors advised on the legal structure of the buyback. We worked closely with the company’s accountants and produced or reviewed buyback agreements and the necessary corporate approval and procedural documentation.
Depending on our client, our team may also take responsibility for filing the correct documents with Companies House.
Usually, all parties have long-standing relationships with the company and each other, which limits their need for warranties. Instead, the focus is typically on the tax and accounting issues, which are normally a key part of the structure, as well as ensuring compliance with the procedural aspects. The Companies Act sets out requirements which must be strictly followed when a company proposes to buy back shares. A failure to do so will potentially result in the buyback being declared void. In effect, this means going back to the position where the buyback has not taken place and the shareholder remains the legal holder. This can have serious consequences and be tricky (and expensive) to resolve.
“Earlier this year, I approached Barcan and Kirby for advice on the sale of my company shares. Having never been through the process before, the team was very supportive in explaining and guiding me through, whilst always looking after my best interests. They were incredibly efficient, friendly and professional, and it was very reassuring to know they had my back.”
– Share buyback client
How we can help
Our corporate and commercial solicitors can act for a company proposing to buy back shares from a shareholder, or can advise the selling shareholders.
For expert advice on company buybacks or any other corporate or commercial matter, get in touch. Call us on 0117 325 2929 or fill out our online enquiry form, and we will be in touch.