Bill 96 of the Companies Act

Share Buy Backs 

As a general rule and explicitly outlined in the Companies Act, a company may not subscribe for its own shares, whether on original subscription or on any subsequent subscription. However, the Companies Act outlines specific exceptions in Article 106 under which a company may acquire its own shares.

These exceptions require certain conditions to be met, including:

• Authorization within the company’s Memorandum and Articles of Association.
• Approval through an extraordinary resolution. This resolution must specify the terms and conditions of the acquisition, including the maximum number of shares that can be acquired, among others; 
• The nominal value of the acquires shares, including shares previously acquired by the company and held by it, must not exceed 50% of the issued share capital;
• The company is restricted from acquiring its own shares if, at the end of the last accounting period, its net assets as stated in the annual accounts are, or would become after the acquisition, less than the total of the called-up share capital and the company’s undistributable reserves. 
• The acquired shares must be fully paid up;
• A company cannot, due to acquiring any of its shares, become the sole holder of its ordinary shares.

In this respect, the Bill is proposing that the company retains the right to cancel any shares acquired with Article 83 excluded from applying to such cancellations. Upon the cancellation taking effect, the issued share capital shall decrease by the nominal value of the cancelled shares.

Reduction of Share Capital

In the revised version, the reduction of issued share capital becomes effective immediately after a period of three months has elapsed following the publication date of the statement. In contrast, under the previous version, the reduction only becomes effective precisely three months from the date the statement was published. This means the new version allows for a more immediate implementation of the reduction once the three-month period has concluded, whereas the old version required waiting until the exact three-month mark before the reduction could take effect.

In the updated version, the Registrar of Courts is tasked with ensuring that a copy of any application and judgment regarding the reduction is served to the Registrar for registration. However, in the previous version, there is no reference to the Registrar of Courts; it merely specifies that the Registrar should be notified. This change highlights a more detailed and procedural approach in the new version, assigning clear responsibilities to the Registrar of Courts for the registration process.

There will be an addition to Article 106 - 106(6) which will state that the Company has the authority to cancel any shares acquired under Article 106 at any time. Once cancelled, the issued share capital decreases by the nominal value of the cancelled shares. (7) mandates that within 14 days, the company must submit a notice of the cancellation the Registrar for registration. (8) imposes administrative penalties on officers of the company who fail to comply with the requirement of submitting the notice of cancellation to the Registrar within the specified timeframe. 

The newly proposed Article 83 outlines the conditions under which a company may reduce its issued share capital or undistributable reserves through an extraordinary resolution passed by the general meeting. One key purpose of this provision is to allow for the creation of a distributable reserve. While this is highlighted as a primary reason for such a reduction, the article does not restrict the company's ability to reduce share capital to only this scenario. Instead, it offers flexibility, indicating that reductions can be pursued for various reasons as deemed necessary by the company. This guidance serves to clarify at least one instance when a reduction might be appropriate, while leaving room for other justifiable circumstances.

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