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Redemption and Buyback of Shares
By Amy Brennan, OmniPro
Mar 12, 2013

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The Companies Act, 1990 provides a mechanism for companies to use the company’s funds to redeem or buyback the shares held by a shareholder in the Company. The Act sets out the conditions that must be met before a company is in a position to redeem or buyback the shares.

A redemption of shares or a buyback of shares are very similar however there are some important differences between them and it is important to understand the proposed transaction and decide on which mechanism that best suits the transaction. In practice we see a lot of transactions are done using a mix of both mechanism so it is important to chose one.

Distributable Profits
One common feature of a redemption or buyback of shares is that the company must have sufficient distributable profits available in order to perform the redemption or buyback. Section 45 of Companies (Amendment) Act, 1983 defines distributable profits as 

  1. A company shall not make a distribution (as defined by section 51) except out of profits available for the purpose.
  2. For the purposes of this Part, but subject to section 47(1), a company's profits available for distribution are its accumulated, realised profits, so far as not previously utilised by distribution or capitalisation, less its accumulated, realised losses, so far as not previously written off in a reduction or reorganisation of capital duly made.
  3. A company shall not apply an unrealised profit in paying up debentures or any amounts unpaid on any of its issued shares.

A realised profit is a tangible profit as opposed to an artificial profit. A distribution is the right to make any amount of distribution depended upon the company being able to produce accounts which demonstrate justification for distribution.

Cancellation of Shares or Treasury Shares
When shares are redeemed or bought back the shares may be cancelled or held as treasury shares. Section 208 and 209 provide for the cancellation of shares or treasury shares. In most cases the shares are cancelled and are no longer in issue.

Redemption of Shares
Section 207 of Companies Act, 1990 provides that a Limited company may issue and redeem redeemable shares. The following link sets out the rules regarding the redemption of shares.

When shares are being redeemed they must be redeemable in name. Section 210 of the Act provides a mechanism for a company to convert its shares to redeemable shares. No shares shall be converted into redeemable shares if as a result of the conversion the nominal value of the issued share capital which is not redeemable would be less than one tenth of the nominal value of the total issued share capital of the company. A G1, G2 form and form 28 should be filed at the Companies Registration Office.

Buyback of Shares
A buyback of shares may also be known as an Acquisition by a Company of Its Own Shares, Purchase of Shares or Share Repurchase. This is provided for in Section 211 Companies Act 1990 which allows a company if authorised by its articles of association, purchase its own shares.

Section 213 provides that a contract must be put in place between the company and the shareholder having their shares repurchased. The contract must be approved by the members by a special resolution at a general meeting at which 21 days notice must be given to allow the members attend the registered office to inspect the contract. A G1 form and a H5 form should be filed at the Companies Registration Office.

Practical Applications
A redemption or buyback of shares can be used in a practical way to facilitate the change of ownership in a company. The following are some examples of where they may be useful:

  • Succession planning – retirement of parents
  • Divorce
  • Disputes
  • Return of Enterprise Ireland or Enterprise Board investments

If you have any company law queries or require assistance in drafting company secretarial documentation, please feel free to contact me on 059 9183888 or

Amy Brennan,
Unit 3, South Court,
Wexford Road Business Park,

T: 059 9183888

OmniPro Corporate Consultants
Company Formations
Company Law
Company Secretarial

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