Plain language law

New Zealand law explained for everyone

 Plain Language Law homepage
Back to
57: Reduction of shareholder liability a distribution
or “Rules for reducing what shareholders owe for their shares”
You could also call this:

“A company can purchase its own shares if it follows specific legal requirements”

A company can buy its own shares, but it must follow certain rules. These rules are explained in sections 59 to 66, section 107, and sections 110 to 112C of the Companies Act. If a company buys its shares in any other way, it’s not allowed.

If a company gets its own shares without following the rules in sections 59 to 66 and sections 110 to 112C, those shares are considered cancelled right away.

After a company buys its own shares, the board must tell the Registrar about it. They need to fill out a special form and send it to the Registrar within 10 working days.

If the board doesn’t tell the Registrar about buying the shares, each director of the company is breaking the law. They could be punished as explained in section 374(2) of the Act.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

Next up: 59: Acquisition of company's own shares

or “Company's rules for buying its own shares”
Next

Part 6 Shares and debentures
Company may acquire its own shares

58Company may acquire its own shares

  1. A company may, in accordance with sections 59 to 66, section 107, and sections 110 to 112C, but not otherwise, acquire its own shares.

  2. Shares acquired by a company otherwise than in accordance with sections 59 to 66 and 110 to 112C are deemed to be cancelled immediately on acquisition.

  3. Within 10 working days of the purchase or acquisition of the shares, the board of the company must ensure that notice in the prescribed form of the purchase or acquisition is delivered to the Registrar for registration.

  4. If the board of a company fails to comply with subsection (3), every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

Notes
  • Section 58(1): amended, on , by section 4 of the Companies (Minority Buy-out Rights) Amendment Act 2008 (2008 No 69).
  • Section 58(2): amended, on , by section 4 of the Companies (Minority Buy-out Rights) Amendment Act 2008 (2008 No 69).
  • Section 58(2): amended, on , by section 7 of the Companies Act 1993 Amendment Act 1994 (1994 No 6).