A company may wish to undertake a share buyback for a variety of reasons, including to return surplus cash to shareholders or to buy out a particular shareholder who is seeking an exit. Any buyback of shares by a company must, unless a relevant exception applies, follow the process in Part 18 of the Companies Act 2006 (the “Act”).
A buyback that is not carried in accordance with the process in the Act will be void which, in some instances, may have the consequence that the relevant shares are still in issue. This can cause significant problems where a defective buyback is discovered during due diligence by a potential buyer of a company. For example, we have worked on transactions where shares which the sellers thought had been bought back needed to be repurchased from a previous shareholder who no longer had any involvement with the company. This can cause significant delays and, at worst, can jeopardize the transaction if the previous shareholder is un-cooperative. In addition, fcontinue reading