Buyback out of capital procedure (Buyback - Funding options: debt and equity - Finance)-FS Flashcards
(22 cards)
When must company accounts be prepared for a buyback out of capital?
They must be prepared within 3 months before the directors sign the statement of solvency.
What must directors do at the first board meeting in a buyback out of capital?
- Decide to use capital
- Approve the statement of solvency
- Approve the auditor’s report
- Approve the purchase terms
- Call a general meeting or propose a written resolution
How long must the Purchase Contract be available before the general meeting?
It must be available at the company’s registered office for at least 15 days prior to the general meeting.
When must the directors sign the Statement of Solvency?
It must be signed no more than 7 days before the general meeting or written resolution.
What resolutions must be passed at the general meeting to authorise a buyback out of capital?
- An ordinary resolution to approve the purchase contract
- A special resolution to authorise the payment out of capital
Can the selling shareholder vote on the buyback resolutions?
Yes, unless their vote is decisive, in which case they must abstain due to conflict of interest (Companies Act 2006, s717).
What must happen within one week of the general meeting approving the buyback?
The buyback out of capital must be published in the London Gazette to allow creditor objections.
How long do creditors have to object to a buyback out of capital?
5 weeks from the date of the special resolution.
When is the second board meeting held in the buyback process?
5–7 weeks after the general meeting, once the period for creditor objections has expired.
What happens at the second board meeting in the buyback out of capital?
- Board resolution to enter the buyback contract
- Two directors must sign the contract
When must the buyback payment out of capital be made?
Within 2 weeks after the end of the 5-week creditor objection period.
What post-purchase filings must directors make following a buyback out of capital?
- Form SH03 (return of purchase of own shares)
- Notice of cancellation of shares within 28 days
- Update the register of members
- Possibly update the PSC register
- Keep a copy of the purchase contract at the registered office for 10 years
What documents must be filed at Companies House before publication in the Gazette?
The Statement of Solvency and Auditor’s Report
What is the time limit for filing the Special Resolution at Companies House?
Within 15 days of the General Meeting
What must the directors confirm about the shares before initiating a buyback out of capital?
That the shares to be bought back are fully paid up.
Where must the Statement of Solvency and Auditor’s Report be kept, and for how long?
At the company’s registered office for five weeks starting from the date the Special Resolution is passed.
What are the consequences of using the written resolution procedure instead of holding a General Meeting?
- The Statement of Solvency and Auditor’s Report must be sent to shareholders with the resolution.
- The purchase contract and Memorandum of Terms must also be sent with the resolution.
How long must the directors retain the minutes of the General Meeting or written resolution?
For 10 years.
What is the significance of publishing the buyback in the London Gazette?
It provides creditors with an opportunity to object to the use of capital for the buyback.
What must happen before the payment out of capital is made for the buyback?
- The 5-week creditor objection period must pass
- The second board meeting must be held
- A Board Resolution must authorise the final payment and contract execution
What are the two director actions required to finalise the buyback contract after the objection period ends?
- Pass a board resolution to execute the contract
- Have two directors sign the buyback contract
What statutory section prevents a resolution from passing if the seller’s vote is decisive?
Section 717 of the Companies Act 2006
