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When can/will a company own its own shares?

A company can buy its shares back but why wouldn't they be cancelled?

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I have searched on a company and found that it owns 52% of its own shares.  On incorporation the shares were issued 98% to the Ltd Co, i.e itself & 2% to another shareholder.  There were changes over a number of years, resulting in the current holding, which are 52% and 48% owned by the other shareholder.

The company is -seemingly - a personal service company, as the name of the company is the name of an individual, who is the sole Director and the other shareholder is the Director's wife.

This area of technical knowledge is not on I have needed to keep up with over the last 30 years(!), so can anyone tell me if this is legal, (I seem to remember that it is possible and I have seen it before) and why a company and an individual would do this?

 

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By pawncob
02nd May 2019 11:25
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Psycho
By Wilson Philips
02nd May 2019 11:49

I've heard of shares being bought back and not cancelled, but I've never come across the situation where shares were issued to the company on incorporation. Not saying that it can't be done, but sounds very odd to me. Are you sure that you are not confusing authorised and issued share capital?

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Replying to Wilson Philips:
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By Cambridge Business
02nd May 2019 12:00

Just to confirm that per Companies House, this is allotted capital. I take that as issued. Am I wrong to think so?

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Replying to Cambridge Business:
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By Accountant A
02nd May 2019 12:38

Cambridge Business wrote:

Just to confirm that per Companies House, this is allotted capital. I take that as issued. Am I wrong to think so?

Tell us the company name and we'll have a look.

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By RMorrison
03rd May 2019 09:39

It's impossible for a company to own shares in itself on incorporation. The subscribers to the memorandum of association are the initial shareholders and since the new company doesn't exist until Companies House incorporates it then clearly that entity can't sign the memorandum.

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Replying to RMorrison:
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By johnhemming
03rd May 2019 09:47

That's what I thought, but I could not find anything online on a cursory look at this. It doesn't really stack up as a concept as if it could not realistically count as capital.

I spend some time studying company law in relation to reductions of capital when Aviva were going around trying to cancel their preference shares (GACA and the like) and I would expect that purchasing issued capital would have to be done out of some reserve or other if only to protect the original issued capital.

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