This summary contains the relevant information, procedure and statutory provisions governing the process of share transfers and share buy-backs. This document also includes the different procedures for buying back shares out of capital or out of profit.
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Share transfer
SDLT When a person acquires company shares, stamp duty may be charged on the
acquisition of the shares. It is charged at 0.5% of the value of consideration for
the shares, rounded up to the nearest multiple of £5.
EXAMPLE- John buys shares in a company for £12,240- SDLT = £12,240 x 0.5% =
£61.20 = £65
EXCEPTIONS
£1,000 or less consideration SDLT not charged
Shares transferred on a ‘recognised growth market’ are exempt from
the tax.
Not charged on transfers of assets between companies in a qualifying
group
411 for business relief, 417 business assets disposal relief
Restrictions on share transfer
MA 26 Share transfer is governed by the company articles. MA 26 allows directors
discretion to refuse the transfer and refuse putting the name on the register.
However, the discretion is removed if there is contrary in the articles
MA 27 Transmission of shares- when shareholder dies or is made bankrupt:
PR’s or trustees are entitled to any dividend due, but they are not entitled to
exercise voting rights or any rights attached.
PR’s must show a grant of representation (page 212 at 9.10)
Relevant sections of the Companies Act 2006
s.545 Company must have power under its constitution to issue shares
s.580 Shares not to be allotted at a discount.
s.768 Share certificate to be evidence of title
s.769 Company has a duty to issue share certificate on allotment
s.770 May not register the transfer unless proper instrument of transfer has been
delivered
s.771 Once the transfer has been lodged with the company they must register the
transfer or refuse to register with reasons for refusal- within 2 months of
transfer
The transferee needs to send the form to the company, where the company
, will then issue a new share certificate with his name within 2 months s.776
Should also ensure that his name is entered into the register of members s.113.
The register is evidence of the transfer s.127 CA
The registrar is notified of this change through a confirmation statement CS01
Capital maintenance and share buy-back
Maintenance of Aveling v Barford- company cannot return capital to shareholders
share capital without consent of court.
Paid up share capital should not be returned to shareholders; capital
should be preserved for the rights of creditors.
Dividends should only be paid out of distributable profits.
Exceptions Company may:
Reduce share capital with consent of the court or by passing
special resolution s.641-648 CA
s.690 share buy-back
redeem its own shares s.684-689
purchase its own shares made by court order under s.994 to
buy out unfairly prejudiced minority.
Return capital to shareholders upon winding up
Share buy-back 706(b)(i) CA 2006 bought back shares become cancelled
So under s.172 directors should consider the commercial
impact as the company is permanently releasing money for
nothing in return.
s.693 off market purchase
option 1: buy-back out of profit or fresh issue of shares
can buy-back shares under s.692(2) if-
The company’s articles don’t forbid this (690(1))
The shares must be fully paid (691(1)); and
When the shares are bought by the company, it must pay for
them at the time of purchase (691(2))
This agreement must be approved by the SH passing an
ordinary resolution at GM or WR (s.694(2)- BM held first to
decide to hold GM or circulate WR.
Shareholder getting his shares bought back are excluded from
the vote s.695(2)
A copy of the contract or summary must be available for
inspection no less than 15 days before the GM s.696(2)
S.736 definition of distributable profits
Administration- pay for shares and sending form SH03 and form SH06
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