Ireland · Shares, company capital and dividends

Acquiring own shares, treasury shares and holdings in a holding company

the Companies Act 2014 · sections 102, 105 to 114 and 116

A buy-back is funded before it is documented. Payment for the acquisition must come out of profits available for distribution, or, where the company proposes to cancel the shares under section 106, out of the proceeds of a fresh issue made for the purpose (section 105(2)). A company that funds a buy-back from working capital has broken the section whatever the paperwork says.

The procedural conditions then bite. Where a special resolution is used, the unanimous written resolution route under section 193 is not available for that purpose (section 105(6)(a)), and the section 194 route carries its own modified 21-day requirement (section 105(9)). Shares acquired under section 105 must be cancelled or held as treasury shares (section 106(1)), and the company has to keep the contract, or a memorandum of its terms if it is not in writing, at its registered office for ten years after full performance (section 112(1)).

Section 102 states the general prohibition on a company acquiring its own shares and prevents a private limited subsidiary from subscribing for, or purchasing partly paid shares in, its parent public company (section 102(4)). Section 107 controls the assignment or release of a right to purchase, and requires a special resolution before any release is entered into (section 107(2)). Section 108 preserves the position for preference shares issued before 5 May 1959, and section 110 controls payments made for acquiring, varying or releasing a purchase right.

Treasury shares carry a hard ceiling: their nominal value may not exceed 10 per cent of the company's capital at any one time (section 109(1)). The maximum and minimum re-allotment prices must be fixed by special resolution passed before any re-allotment contract is entered into, unless the case falls within section 109(9) (section 109(8)). On cross-holdings, a company cannot be a member of its holding company and any allotment or transfer of shares to its subsidiary is void (section 113(1)), subject to the section 114 exceptions, and a return must reach the Registrar within 30 days after delivery of the shares to the company (section 116(1)).

Files 12, 13, 14 and 15 of the IE-COMPANY package cover this situation. File 12 works through the acquisition itself, the funding and the resolution route. File 13 covers assignment, release, redeemable preference shares and failure to redeem. File 14 covers treasury shares, the 10 per cent ceiling, the re-allotment price range and the ten-year retention of the contract. File 15 covers membership of a holding company and shares held by a subsidiary.

This situation is covered by these files from the pack IE-COMPANY

• File 12 · Acquisition by a company of its own shares
• File 13 · Assignment of the right to purchase, redeemable preference shares and failure to redeem
• File 14 · Treasury shares and retention of purchase documents
• File 15 · Membership of a holding company and shares held by a subsidiary

ComplianceSME tracks the Companies Act 2014 and issues update files through the membership, so that you are never working from a superseded version. Membership

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