Another method to reduce share capital: company to buy back its own shares
- Section 236 (1) of Company Ordinance (Cap. 622): ... , a company may buy back its own shares ...
- CR relevant form: [NSC 2]
Requirements on company to buy back its own shares:
- Solvency test also required if payment out of capital. Section 259 (1) of Company Ordinance (Cap. 622): Solvency statement for payment out of capital - All directors of the company must make a solvency statement that complies with Division 2 in relation to the payment out of capital.
- Special resolution required for unlisted Companies. Section 244 (1) of Company Ordinance (Cap. 622): An unlisted company may buy back its own shares under a contract that is authorized in advance by special resolution.
- Finance of the Payment: Section 257 (2) of Company Ordinance (Cap. 622): Payment for redemption or buy-back - Subject to subsections (3) and (4), a company may make a payment in respect of a redemption or buy-back of its own shares—
- (a) out of the company’s distributable profits;
- (b) out of the proceeds of a fresh issue of shares made for the purpose of the redemption or buy-back; or
- (c) out of capital in accordance with this Subdivision.