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Buying back shares in own company.

A client company gave shares to an ex-employee and has now bought them back at a higher value.

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A client company gave shares to an ex-employee at nominal value (£1 per share) and has now bought them back at a higher value.

How do I reflect this in the company's accounts? 

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By bernard michael
18th Sep 2020 09:31

Credit bank, debit reserves ( I assume they had sufficient to cover the total paid)

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Replying to bernard michael:
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By Adam84
18th Sep 2020 10:12

Yes, paid in full. Thank you.

Would there now be a revaluation of shares required to be reported at Companies House?

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By thestudyman
18th Sep 2020 10:29

Are the shares to be cancelled or left in treasury?

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By johnt27
18th Sep 2020 10:42

Presumably on the original gift the double entry was:
DR P&L
CR Share cap

On the buy back you'd do either:
DR P&L reserve
CR Bank
DR Share capital
CR Capital redemption

or

DR Treasury share reserve
CR Bank

The ex employee and client company may have some tax issues to untangle depending on whether or not the initial gift was at MV or not and how much gain has been made.

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By Adam84
30th Sep 2020 07:38

Apologies for the late reply, but I am still unclear about how to deal with this in the accounts.

The original 5 shares were given away with a value of £1 each.

The number of shares issued in the company has not changed.

The company has bought back the 5 shares, paying the former employee/shareholder in full, but for a higher value than the shares were originally given away for.

The shares have been retained by the company and left in treasury.

Has the value of the shares automatically increased due to the company paying more for them than when they sold them?

If so, does this need to be reflected in the balance sheet and at Companies House?

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Replying to Adam84:
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By johnt27
30th Sep 2020 08:24

I've already given you the double entry required to get your balance sheet right:
DR Treasury share reserve
CR Bank

At Companies House the CS01 will show the 5 shares still in issue owned by the company.

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Replying to Adam84:
Psycho
By Wilson Philips
30th Sep 2020 08:46

If the number of shares has not changed, how was the original ‘gift’ effected?

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