Buyback of Shares by a Private Company

Due to the fact that shareholders in private limited companies are restricted in transferring their shares the buyback of shares is a convenient way for a private limited company to return their investment to its shareholders. Although the buyback of shares can be undertaken by public companies this article will concentrate on the processes involved in a buyback conducted by a private company using its distributable reserves. It is important that a buyback is executed correctly as failure to comply with the requirements can lead to the buyback being declared invalid fines on directors and ultimately the involvement of the courts.