The Companies Act 2006 (the Act) sets out the specific and strict procedure for a company purchasing its own shares.
Where this is not followed, the transaction risks being void, and, in addition, an offence may be committed by the company and every officer in default.
A defective buyback means that, even where the selling shareholder receives payment, the shares may not be cancelled and remain an asset of the shareholder, which can create significant legal and tax issues.
It is, therefore, very important that, when dealing with a share buyback, the company takes appropriate advice (both legal and accounting) to ensure it gets it right.
Below, we explore some of the common mistakes made at each stage, from pre- to post-buyback considerations and give tips to mitigate them.