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New Zealand law explained for everyone

Companies Act 1993

Shares and debentures - Company may acquire its own shares

60: Board may make offer to acquire shares

You could also call this:

“Company board can offer to buy shares from shareholders”

The board of a company can offer to buy shares from its shareholders in two ways. They can offer to buy a portion of shares from all shareholders, which keeps everyone’s voting power the same. This offer must give shareholders a fair chance to accept. Or, they can offer to buy shares from one or more shareholders if all shareholders agree in writing, or if the company’s rules allow it and they follow the steps in section 61.

If the board offers to buy a portion of shares from everyone, they can also offer to buy extra shares from some shareholders if others don’t want to sell. If too many extra shares are offered, they’ll reduce the number fairly.

Before making an offer, the board must decide that buying the shares is best for the company, that the offer is fair, and that they’re not hiding any important information that could make the offer unfair. They need to write down why they think this.

The directors who agree with this decision must sign a paper saying so. They can combine this with other papers they need to sign about buying shares.

The board can’t make the offer if they stop believing it’s best for the company, if they think it’s no longer fair, or if they learn new information that makes the offer unfair.

If a director doesn’t sign the paper when they should, they’re breaking the law and could be punished as described in section 373(1).

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM320183.

Topics:
Business > Industry rules
Business > Fair trading
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“Company's rules for buying its own shares”

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“Rules for companies buying back their own shares”

Part 6 Shares and debentures
Company may acquire its own shares

60Board may make offer to acquire shares

  1. The board of a company may make an offer to acquire shares issued by the company if the offer is—

  2. an offer to all shareholders to acquire a proportion of their shares, that—
    1. would, if accepted, leave unaffected relative voting and distribution rights; and
      1. affords a reasonable opportunity to accept the offer; or
      2. an offer to 1 or more shareholders to acquire shares—
        1. to which all shareholders have consented in writing; or
          1. that is expressly permitted by the constitution, and is made in accordance with the procedure set out in section 61.

          2. Where an offer is made in accordance with subsection (1)(a),—

          3. the offer may also permit the company to acquire additional shares from a shareholder to the extent that another shareholder does not accept the offer or accepts the offer only in part; and
            1. if the number of additional shares exceeds the number of shares that the company is entitled to acquire, the number of additional shares shall be reduced rateably.

              1. The board may make an offer under subsection (1) only if it has previously resolved—

              2. that the acquisition in question is in the best interests of the company; and
                1. that the terms of the offer and the consideration offered for the shares are fair and reasonable to the company; and
                  1. that it is not aware of any information that will not be disclosed to shareholders—
                    1. which is material to an assessment of the value of the shares; and
                      1. as a result of which the terms of the offer and consideration offered for the shares are unfair to shareholders accepting the offer.

                      2. The resolution must set out in full the reasons for the director's conclusions.

                      3. The directors who vote in favour of a resolution required by subsection (3) must sign a certificate as to the matters set out in that subsection, and may combine it with the certificate required by section 52 and any certificate required under section 61.

                      4. The board of a company must not make an offer under subsection (1) if, after the passing of a resolution under subsection (3) and before the making of the offer to acquire the shares,—

                      5. the board ceases to be satisfied that the acquisition in question is in the best interests of the company; or
                        1. the board ceases to be satisfied that the terms of the offer and the consideration offered for the shares are fair and reasonable to the company; or
                          1. the board becomes aware of any information that will not be disclosed to shareholders—
                            1. which is material to an assessment of the value of the shares; or
                              1. as a result of which the terms of the offer and consideration offered for the shares would be unfair to shareholders accepting the offer.

                              2. Every director who fails to comply with subsection (5) commits an offence and is liable on conviction to the penalty set out in section 373(1).