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Companies Act 1993

Shares and debentures - Redemption of shares

75: Redemption on fixed date

You could also call this:

“Shares redeemable on a set date: What happens when a company buys them back”

When a company has shares that can be redeemed on a specific date, they must follow certain rules. You need to know that on the set date, the company has to buy back the share from you. Once they do this, the share is no longer valid. From that day on, you’re considered an unsecured creditor of the company for the money they owe you for buying back the share.

It’s important to understand that when a company redeems shares in this way, it’s not seen as a distribution of money when it comes to sections 52 and 53 of the Companies Act. However, it is treated as a distribution for some parts of section 56, specifically subsections (1) and (5).

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM320418.

Topics:
Business > Industry rules
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Part 6 Shares and debentures
Redemption of shares

75Redemption on fixed date

  1. Subject to this section, if a share is redeemable on a specified date—

  2. the company must redeem the share on that date; and
    1. the share is deemed to be cancelled on that date; and
      1. from that date 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 75(1)(c): amended, on , by section 5 of the Companies Act 1993 Amendment Act 1997 (1997 No 27).