[F1[F2(1)A private limited company may purchase its own shares out of capital in accordance with Chapter 5.

(1ZA)If authorised to do so by its articles, a private limited company may purchase its own shares out of capital otherwise than in accordance with Chapter 5, up to an aggregate purchase price in a financial year of the lower of—

(a)£15,000, or

(b)the nominal value of 5% of its fully paid share capital as at the beginning of the financial year.]

(1A)If the share capital of the company is not denominated in sterling, the value in sterling of the share capital shall be calculated for the purposes of subsection [F3(1ZA)(b)] at an appropriate spot rate of exchange.

(1B)The rate must be a rate prevailing on a day specified in the resolution authorising the purchase of the shares.]

(2)[F4Subject to [F5subsections (1) and (1ZA)]]—

(a)a limited company may only purchase its own shares out of—

(i)distributable profits of the company, or

(ii)the proceeds of a fresh issue of shares made for the purpose of financing the purchase, and

(b)any premium payable on the purchase by a limited company of its own shares must be paid out of distributable profits of the company, subject to subsection (3).

(3)If the shares to be purchased were issued at a premium, any premium payable on their purchase by the company may be paid out of the proceeds of a fresh issue of shares made for the purpose of financing the purchase, up to an amount equal to—

(a)the aggregate of the premiums received by the company on the issue of the shares purchased, or

(b)the current amount of the company's share premium account (including any sum transferred to that account in respect of premiums on the new shares),

whichever is the less.

(4)The amount of the company's share premium account is reduced by a sum corresponding (or by sums in the aggregate corresponding) to the amount of any payment made under subsection (3).

(5)This section has effect subject to section 735(4) (terms of purchase enforceable in a winding up).