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New Zealand law explained for everyone

Companies Act 1993

Shares and debentures - Redemption of shares

69: Redemption at option of company

You could also call this:

“Company can buy back its own shares under specific conditions”

If a company wants to buy back its own shares, it needs to follow some rules. The company can only do this if it treats all shareholders of the same type fairly, or if all shareholders agree in writing. Sometimes, the company’s rules might allow it to buy back shares from just some shareholders, but it needs to follow a special process for this.

Before the company can buy back shares, the board of directors must decide that it’s a good idea for the company. They also need to make sure the price they’re paying for the shares is fair. The directors have to write down why they think it’s a good idea and why the price is fair.

The directors who agree with this decision need to sign a special document saying they believe it’s the right thing to do. If the directors change their minds before actually buying the shares, they can’t go ahead with it.

If a director doesn’t sign the document when they should, they might get in trouble with the law.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM320411.

Topics:
Business > Industry rules
Business > Fair trading
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68: Meaning of redeemable, or

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Part 6 Shares and debentures
Redemption of shares

69Redemption at option of company

  1. A company must not exercise an option to redeem shares unless—

  2. the option is exercised in relation to all shareholders of the same class and in a manner that will leave unaffected relative voting and distribution rights; or
    1. the option is exercised in relation to 1 or more shareholders and—
      1. all shareholders have consented in writing; or
        1. the option is expressly permitted by the constitution and is exercised in accordance with the procedure set out in section 71.

        2. A company must not exercise an option to redeem shares unless, before the exercise of the option, the board of the company has resolved—

        3. that the redemption of the shares is in the best interests of the company; and
          1. the consideration for the redemption of the shares is fair and reasonable to the company.

            1. The resolution must set out in full the grounds for the directors’ conclusions.

            2. The directors who vote in favour of a resolution required by subsection (2) must sign a certificate as to the matters set out in that subsection and may combine it with the certificate required by section 70 and any certificate required by section 71.

            3. A company must not exercise an option to redeem shares under subsection (1) if, after the passing of a resolution under that subsection and before the exercise of the option to redeem the shares, the board ceases to be satisfied that—

            4. the redemption of the shares is in the best interests of the company; or
              1. the consideration for the exercise of the option is fair and reasonable to the company.

                1. Every director who fails to comply with subsection (4) commits an offence and is liable on conviction to the penalty set out in section 373(1).