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Companies Act 1993

Shares and debentures - Company may acquire its own shares

63: Stock exchange acquisitions subject to prior notice to shareholders

You could also call this:

“Companies must notify shareholders before buying their own shares on the stock exchange”

If your company wants to buy its own shares on the stock exchange, the board of directors needs to follow some rules. They must first make a decision that includes these points:

  1. They will buy no more than a certain number of shares through offers on one or more stock exchanges.

  2. Buying these shares is good for the company and its shareholders.

  3. The offer and the price for the shares are fair to the company and its shareholders.

  4. They don’t know of any important information that won’t be shared with shareholders, which could affect the value of the shares or make the offer unfair.

The directors need to write down why they think these things are true. The directors who agree with this decision must sign a paper saying so. They can combine this with another paper required by section 52.

The company must send each shareholder a document with information about the offer. This document needs to follow the rules in section 64. The offer must be made between 10 working days and 12 months after sending this document.

The company can’t make the offer if the board changes its mind about any of the points they decided on earlier. Also, they can’t buy more shares than they originally planned.

If you’re a shareholder and you think the offer isn’t good for the company or isn’t fair, you can ask a court to stop it. The company can do this too.

If the directors don’t follow these rules, they might get in trouble with the law. The company might also get in trouble if it doesn’t send the right information to shareholders.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM320188.

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Part 6 Shares and debentures
Company may acquire its own shares

63Stock exchange acquisitions subject to prior notice to shareholders

  1. The board of a company may make offers on 1 or more stock exchanges to all shareholders to acquire shares only if it has previously resolved—

  2. to acquire, by means of offers on 1 or more stock exchanges to all shareholders, not more than a specified number of shares; and
    1. that the acquisition is in the best interests of the company and its shareholders; and
      1. that the terms of the offer and the consideration offered for the shares are fair and reasonable to the company and its shareholders; 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 directors' conclusions.

            3. The directors who vote in favour of a resolution required by subsection (1) must sign a certificate as to the matters set out in that subsection and may combine it with the certificate required by section 52.

            4. Offers may be made under subsection (1) by any director or employee of the company who is authorised to do so by the resolution of the board under that subsection.

            5. An offer must not be made under subsection (1) if the number of shares to be acquired together with any shares already acquired would exceed the maximum number of shares the board has resolved to acquire under that subsection.

            6. An offer must not be made under subsection (1) if, after the passing of a resolution under that subsection and before the making of the offer to acquire the shares,—

            7. the board ceases to be satisfied that the acquisition is in the best interests of the company and its shareholders; 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 and its shareholders; 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. Before an offer is made pursuant to a resolution under subsection (1), the company must send to each shareholder a disclosure document that complies with section 64.

                    3. The offer must be made not less than 10 working days and not more than 12 months after the disclosure document has been sent to each shareholder.

                    4. A shareholder or the company may apply to the court for an order restraining the proposed acquisition on the grounds that—

                    5. it is not in the best interests of the company or the shareholders; or
                      1. the terms of the offer and, if it is disclosed, the consideration offered for the shares are not fair and reasonable to the company or the shareholders.

                        1. Every director who fails to comply with subsection (3) commits an offence and is liable on conviction to the penalty set out in section 373(1).

                        2. If a company fails to comply with subsection (6),—

                        3. the company commits an offence and is liable on conviction to the penalty set out in section 373(1); and
                          1. every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(1).

                            Notes
                            • Section 63(1): amended, on , by section 10(1) of the Companies Act 1993 Amendment Act 1994 (1994 No 6).
                            • Section 63(1)(a): amended, on , by section 10(1) of the Companies Act 1993 Amendment Act 1994 (1994 No 6).
                            • Section 63(3A): inserted, on , by section 10(2) of the Companies Act 1993 Amendment Act 1994 (1994 No 6).
                            • Section 63(4): amended, on , by section 10(3) of the Companies Act 1993 Amendment Act 1994 (1994 No 6).
                            • Section 63(5): amended, on , by section 10(4) of the Companies Act 1993 Amendment Act 1994 (1994 No 6).
                            • Section 63(10): replaced, on , by section 58 of the Companies Amendment Act 2014 (2014 No 46).