Purchase of and Reduction in Share Capital

Reduction supported by a solvency statement – From £225+vat

A private limited company can reduce its capital by special resolution supported by a solvency statement, so long as the reduction does not result in only redeemable shares being held. BTC staff will prepare ready for submission to Companies House:

• Draft board minutes of the directors recommending the reduction,
• A copy of a special resolution of members authorising the capital reduction,
• A copy of the solvency statement of the directors’ made in accordance with sections 642(1)(a) and 643 of the Companies Act 2006; all the company directors must sign the solvency statement.
• A statement of capital of the company; and
• A statement of compliance by the directors.

A statement of compliance by the directors confirms that the company made a copy of the solvency statement available to each of the eligible members as required and that the directors did not make the solvency statement more than 15 days before the company’s members passed the resolution. All the directors must sign this statement of compliance.

The company must deliver a copy of the solvency statement and resolution, and the statement of capital and statement of compliance by the directors, to Companies House. The company must deliver all of these documents to Companies House within 15 days of the date of the passing of the resolution. The reduction of capital will not take effect until Companies House has registered a copy of the solvency statement, resolution and statement of capital.

Redemption of shares – from £75+vat

If a private company or plc has issued redeemable shares, it may redeem the shares in accordance with the terms of redemption. The directors may, if authorised either by the company’s articles or by a resolution, set the terms of redemption. Otherwise, the terms must be stated in the company’s articles. When shares are redeeming in a company, the company must deliver Form SH02 which includes a statement of capital to Companies House within a month of the redemption.

BTC staff will prepare ready for submission;

• The board minutes of the meeting of directors approving the redemption;
• Companies House form SH02, and
• A statement of capital

Company Purchase of Own Shares – from £125+vat

Subject to any restriction or prohibition in the articles and the approval of its shareholders, a company can purchase its shares. But it cannot do so if this would leave only redeemable shares in issue.

When a company purchases its own shares, it cancels the shares on their return. If it cancels the shares immediately which will be the case for all private companies and most PLC’s, it must deliver Form SH03 which includes a statement of capital to Companies House.

A purchase of a company’s own shares may be subject to stamp duty. If the consideration for the shares is above £1,000, HM Revenue & Customs (HMRC) must stamp the Form SH03 before it is delivered to Companies House. If the consideration is £1,000 or less, the form need not be stamped, but a director must sign the certification on the form.

Subject to the Articles, BTC staff will prepare ready for submission;

• A sale and purchase agreement between the Company and the seller,
• Minutes of the meeting of the board of directors recommending the purchase,
• Written resolution of members approving the purchase,
• Companies House form SH03,
• A statement of Capital, and
• Advice on the value of stamp duty payable, if applicable

Company Purchase of Own Shares – HMRC Application For Advance Clearance Under S225 ICTA 1988 from £250+vat

When a company makes a purchase of own shares which involves a payment in excess of the capital originally subscribed for the shares, the excess constitutes a distribution. However, such a payment is treated as not giving rise to a distribution if, among other conditions, the purchase is made wholly or mainly to benefit a trade carried on by the company. Advance clearance of the treatment is required in some instances.

BTC tax specialists will make the application to HMRC on your behalf for the purchase of share as falling within Section219(1)(a), for the payment is be treated as a capital distribution.

Contact Us

To discuss your requirements for any of the above services or btain a full quote call BTC on FREEPHONE 0800 0854127 or COMPLETE OUR ENQUIRY FORM