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Companies Act 1993

Shares and debentures - Redemption of shares

74: Redemption at option of shareholder

You could also call this:

“How shareholders can ask the company to buy back their redeemable shares”

If you own a share that you can choose to redeem, you can tell the company you want them to buy it back. This is called redeeming the share. When you do this, you need to give the company proper notice. The company must then buy back your share on the date you specify in your notice. If you don’t specify a date, they must buy it back on the day they receive your notice.

When the company buys back your share, it’s considered cancelled on that same day. From then on, you’re no longer a shareholder for that share. Instead, you become an unsecured creditor of the company for the money they owe you for buying back the share.

This type of share redemption isn’t considered a distribution when it comes to sections 52 and 53 of the Companies Act. However, it is treated as a distribution for subsections (1) and (5) of section 56 of the Act.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM320416.

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Part 6 Shares and debentures
Redemption of shares

74Redemption at option of shareholder

  1. Subject to this section, if a share is redeemable at the option of the holder of the share, and the holder gives proper notice to the company requiring the company to redeem the share,—

  2. the company must redeem the share on the date specified in the notice, or if no date is specified, on the date of receipt of the notice; and
    1. the share is deemed to be cancelled on the date of redemption; and
      1. from the date of redemption the former shareholder ranks as an unsecured creditor of the company for the consideration payable on redemption.

        1. A redemption under this section—

        2. is not a distribution for the purposes of sections 52 and 53; but
          1. is deemed to be a distribution for the purposes of subsections (1) and (5) of section 56.

            Notes
            • Section 74(1)(c): amended, on , by section 4 of the Companies Amendment Act (No 2) 2004 (2004 No 24).