This Content Was Last Updated on January 9, 2016 by Jessica Garbett


Article contributed by ACCA

The Nuttall Review on employee ownership found that companies seeking to utilise direct share ownership faced regulatory burdens and restrictions when buying back shares and on the ability of private companies to hold shares in treasury.

The measure is designed to simplify the process for buy back of shares. The change is effective from 30 April 2013 and there have been amendments to the Companies Act 2006 affecting companies buying back shares. The regulations change Part 18 of the Companies Act and will make it easier for companies to buy back shares from departing employees who were members of an employees’ share scheme.

The regulation will bring about a number of changes to ease share buybacks, including:

  • only an ordinary shareholder resolution will be needed as opposed to the current special resolution to approve a share buyback
  • provided that a company’s Articles of Association allow, section 692 of the Companies Act 2006 will include the following limits:

    ‘(1) A private limited company may purchase its own shares:

    (a) out of capital in accordance with Chapter 5, and

    (b) with cash (if authorised to do so by its articles) up to an amount in a financial year not exceeding the lower of:

    (i)  £15,000, or

    (ii) the value of 5% of its share capital.

    (1A) If the share capital of the company is not denominated in sterling, the value in sterling of the share capital shall be calculated for the purposes of subsection (1) (b)(ii) at an appropriate spot rate of exchange.

    (1B) The rate must be a rate prevailing on a day specified in the resolution authorising the purchase of the shares.’

  • private companies will be allowed to hold shares in treasury if they were bought out of distributable profits or cash.

Further details of other changes, key considerations for a company and a link to the Nuttall review recommendations are available on ACCA UK’s Technical Advisory website.