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Book contents
- Frontmatter
- Contents
- List of figures
- List of tables
- Preface and acknowledgments
- Glossary
- List of abbreviations
- Table of cases
- Table of legislation
- PART I The essential qualities of the corporation
- PART II The corporation and its capital
- 4 Incorporating the company
- 5 Constituting the company's share capital
- 6 Increasing the company's capital
- 7 Distribution of dividends and maintenance of share capital
- 8 Repurchases of shares
- 9 The nature of shares and classes of shares
- PART III Governing the corporation
- PART IV Corporate combinations, groups and takeovers
- References
- Index
8 - Repurchases of shares
from PART II - The corporation and its capital
- Frontmatter
- Contents
- List of figures
- List of tables
- Preface and acknowledgments
- Glossary
- List of abbreviations
- Table of cases
- Table of legislation
- PART I The essential qualities of the corporation
- PART II The corporation and its capital
- 4 Incorporating the company
- 5 Constituting the company's share capital
- 6 Increasing the company's capital
- 7 Distribution of dividends and maintenance of share capital
- 8 Repurchases of shares
- 9 The nature of shares and classes of shares
- PART III Governing the corporation
- PART IV Corporate combinations, groups and takeovers
- References
- Index
Summary
Required reading
EU: Second Company Law Directive, arts. 18–22, 24, 24a, 39; Buy-back Regulation, arts. 2–6
D: AktG, §§ 16, 17, 56, 57(1) no. 2, 71, 71b–71e, 291(3); GmbHG, § 33; HGB, § 272(1) nos. 4–6, (4)
UK: CA 2006, secs. 690–732; FSA Listing Rules, Rule 12
US: DGCL, § 160; Exchange Act § 9(a)(2); SEC Rule 10b-18
Rules on share repurchases
Introduction
This chapter builds on many of the issues discussed in our analysis of dividends and capital maintenance. When a company repurchases its shares, it transfers company assets (the purchase price) to the members from whom the shares are purchased. Thus, from a capital maintenance perspective, share repurchases are merely an alternative to the payment of dividends and should be subject to the same limitations. Creditor protection and capital maintenance are not, however, the only issues involved in share repurchases. Because shares, when accumulated in sufficient quantities, lend the capacity to control the company, the ability to purchase them is also the power to deal in corporate control. Also, because one of the ways that shares can be repurchased is “redemption,” i.e. the repurchase of securities at the option of the holder or the issuer, as contractually agreed in advance between these parties, repurchase can sometimes be achieved without the voluntary consent of the seller. Thus, if the law did not regulate the repurchase of shares, a company's management could under some circumstances use share repurchases to usurp power for itself.
- Type
- Chapter
- Information
- Comparative Company LawText and Cases on the Laws Governing Corporations in Germany, the UK and the USA, pp. 241 - 258Publisher: Cambridge University PressPrint publication year: 2010