Part 23 Company distributions

Chapter 3 Matters which are not distributions

Purchase of own shares

1038 Section 1037: effect of entitlement to profits
(1) The seller's interest as a shareholder is not taken to be substantially reduced for the purposes of section 1037(1) if—
(a) the seller would, if the company distributed all its profits available for distribution immediately after the purchase, be entitled to a share of those profits, and
(b) that share expressed as a fraction of the total of those profits is more than 75% of the corresponding fraction immediately before the purchase.
(2) In determining for the purposes of subsection (1) the division of profits among the persons entitled to them, a person entitled to periodic distributions calculated by reference to fixed rates or amounts is regarded as entitled to a distribution of the amount, or maximum amount, to which the person would be entitled for a year.
(3) In subsection (1) “profits available for distribution” has the meaning given by section 830(2) of the Companies Act 2006, but with the differences mentioned in subsections (4) and (5).
(4) For the purposes of subsection (1) the amount of the profits available for distribution (whether immediately before or immediately after the purchase) is treated as increased—
(a) in the case of every company, by £100, and
(b) in the case of a company from which any person is entitled to periodic distributions calculated by reference to fixed rates or amounts, by a further amount equal to that required to make the distribution to which the person is entitled in accordance with subsection (2).
(5) If the total of the sums payable by the company—
(a) on the purchase, and
(b) on any redemption, repayment or purchase of other shares of the company taking place at the same time,
exceeds the amount of the profits available for distribution immediately before the purchase, that amount is treated as further increased by an amount equal to the excess.
(6) References in this section to entitlement are, except in the case of trustees and personal representatives, references to beneficial entitlement.