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Shares buy back and resale with insufficient funds.

Shares buy back and resale with insufficient...

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Here is a situation for you, Ladies and Gentleman,

The company wants to buy back 2,500 shares. Total shares are 10,000

P&L Loss (£100k)

Bank Account £20k

Share Premium Account £400k

Share buy back price £5mln

Then the shares are resold for the same amount £5mln

So the question is: it possible to buy back shares wen you have not got enough resources to do so?

Replies (3)

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By johngroganjga
11th Nov 2015 05:06

Why does the purchaser not just buy them from the vendor, without the company acting as intermediary? Much simpler that way.

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By Ruddles
11th Nov 2015 08:26

John is spot on

Unless the vendor is a company and wants income rather than capital treatment of the disposal.

And in any event, the question answers itself. If  the company does not have "enough resources to do so" then, by definition, it cannot. A capital reduction might be possible but you'd be left with no shares to sell on, so would require an issue of new shares. Which takes us back to John's point.

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11th Nov 2015 13:21

But to answer the original question

Yes - the company can do it either by:

1: Financing it from the proceeds of the new share issue; and ; or

2: By going through the "purchase out of capital" route provided for in CA 2006.

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