Employee ownership and share buy backs – BIS guide
Some points to note on BIS guide.
On 18 November 2013, BIS published a Simple Guide to the Companies Act 2006 (Amendment of Part 18) Regulations 2013.
The Regulations came into force on 30 April 2013 and are intended to simplify certain aspects of the share buyback regime in the Companies Act 2006, primarily in order to facilitate employee ownership.
The Guide states that there may be a need to amend the Regulations and that BIS will consult on some further minor legislative changes. This is welcome as we are aware of areas where the Regulations are not clear.
In particular, the Guide refers to potential changes in relation to the application of the ‘de minimis exemption’ (which allows the purchase of shares for up to £15,000 or 5% of share capital (whichever is the lower). The changes may:
- Clarify the operation of the exemption where shares are bought back at a premium or discount (the Guide notes that the Regulations do not provide for treatment of shares bought under the de minimis provisions at a premium or discount and states that purchases must be at nominal value of the shares).
- Clarify whether permitting shares bought back out of capital using the de minimis provisions to be held ‘in treasury’ is consistent with the treatment of other buy backs out of capital (the Guide currently states that such purchases are permitted).
The guidance is written on the basis that de minimis buy-backs are out of capital, rather than out of distributable profits, that the procedures in Chapter 5 of Part 18 do not apply to relevant purchases and that the de minimis procedures may be used as an alternative to the power to make a purchase from capital under Chapter 5. However the relevant provisions in the Regulations could usefully be amended to clarify these aspects as well.
Pending resolution of any uncertainty through amended legislation, it would be advisable for companies to take legal advice on these matters.
3 December 2013