The rule against acquisition of a company's own shares


Published by a ³ÉÈËÓ°Òô Corporate Crime expert
Practice notes

The rule against acquisition of a company's own shares


Published by a ³ÉÈËÓ°Òô Corporate Crime expert

Practice notes
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The offence of acquisition of limited company's own Shares

The general rule is that a limited company must not acquire its own shares, whether by purchase, subscription or otherwise, except in accordance with the provisions of the Companies Act 2006 (CA 2006). A limited company may acquire any of its own fully paid shares if it does not pay for them, ie they may not give valuable consideration for their acquisition.

The general rule prohibiting a limited company acquiring its own shares does not prohibit:

  1. •

    the acquisition of shares in a reduction of Share Capital duly made

  2. •

    the purchase of shares in pursuance of an order of the court; on application to the court to cancel resolution for re-registration as a Private company, on objection to redemption or purchase of shares out of capital, under a remedial order in case of breach of prohibition of public offers by private company or as protection of members against unfair prejudice, or

  3. •

    the forfeiture of shares, or the acceptance of shares surrendered in lieu, in

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Jurisdiction(s):
United Kingdom
Related legal acts:
Key definition:
Shares definition
What does Shares mean?

The CA 2006 merely provides that a share is a share in the company's share capital. A company's share capital comprises the number of shares issued by it to investors either on or after incorporation. Those investors then become the shareholders in the company. A shareholder’s shares are their personal property. By contrast, the assets of a company are owned by the company itself. Owning shares does not entitle a shareholder to any property rights in the company's assets.

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The rule against acquisition of a company's own shares

The rule against acquisition of a company's own sharesThe offence of acquisition of limited company's own shares The general rule is that a limited company must not acquire its own shares, whether by purchase, subscription or otherwise, except in accordance with the provisions of the Companies Act