UK Private Company Share Buyback Requirements

1.	Authority to Buy Back Shares
•	The company must check its Articles of Association to ensure they do not prohibit share buybacks. If necessary, they may need to be amended.

Source: mfmac.com

2.	Types of Buybacks
•	Off-Market Purchase: Private companies usually conduct off-market purchases, which means shares are bought outside of a stock exchange.

Source: mfmac.com

3.	Funding the Buyback

A company can fund the buyback using the following methods:

•	Distributable Profits: Buyback can be financed from retained profits.
•	Proceeds from a New Share Issue: New shares can be issued to raise funds for the buyback.
•	Capital: If distributable profits are insufficient, the company can use capital but must follow a strict process including:
•	A director’s solvency statement.
•	Auditor confirmation.
•	Public notice and filings.

De Minimis Exemption: Companies can buy back up to the lower of £15,000 or 5% of the company’s share capital in a financial year without the full capital payment procedure.

Source: ouryclark.com

4.	Buyback Contract
•	A formal buyback contract must be drawn up, outlining the terms of the share purchase.
•	Shareholders must approve the contract through an ordinary resolution.

Source: mfmac.com

5.	Payment for Shares
•	The company must ensure that shares are fully paid at the time of purchase.
•	Deferred payments or installments are not generally allowed.

Source: accaglobal.com

6.	Post-Buyback Actions
•	Shares can either be canceled or held in treasury, depending on the funding method used.
•	The company must submit necessary filings such as Form SH03 (Return of Purchase of Own Shares) to Companies House within set deadlines.

Source: ouryclark.com

7.	Tax Implications
•	The treatment of buyback proceeds as capital gains (potentially qualifying for Business Asset Disposal Relief) or as income distributions depends on the buyback’s circumstances.
•	Seeking tax advice is recommended to avoid unexpected liabilities. Of course it is.

Source: gabyhardwicke.co.uk