There are a number of important provisions under this heading, and the most notable may be summarised as follows:
• There are certain circumstances in which a CLS may buy its own shares. Section 102 sets these out. It also forbids a CLS to buy shares in its parent public company.
• The section is a mixture of Section 41 of the C(A)A 1983 and an EU Regulation (S.I. No 67 of 1997).
• The existing law is reproduced, but what is new is the way it is phrased. Positive language is used (“a company may acquire…”). This is to highlight that a CLS has an entitlement to acquire its own shares – as long as it does so in conformity with this section.
• Certain subscriptions and allotments are not effected by these rules, and they are set out in Section 103.
• What happens if a nominee of a CLS acquires shares in the CLS? This situation is provided for in Section 104. The short answer is that, usually, those shares are treated as being owned by the nominee and the CLS has no beneficial interest in them.
• Section 105 – entitled “Acquisition of own shares” – is a long section (link), and is taken from a number of sections in the CA 1990. It provides that a CLS may acquire its own shares by purchase; where those shares are redeemable shares, it may acquire them by redemption or purchase.
• The new section on treasury shares can be found at Section 109. A CLS can only allow 10% of its shares to be classed as treasury shares. Treasury shares are considered to be shares that a CLS holds in itself (Section 106).
• Incidental payments made in connection to own share purchase must be paid out of distributable profits (Section 110). If this rule is breached, either the purchase or the release (whichever applies in the situation) is void.
• The section dealing with the company’s failure to redeem or purchase shares is now Section 111. A new element is that the Circuit Court now has jurisdiction to grant specific performance of contracts.
• Within 30 days of a CLS purchasing its own shares, the CLS must notify the Registrar (Section 116).
A company cannot be a member of a company which is its holding company. Any allotment of transfer of shares in a company to its subsidiary is void.
This is a re-enactment of the rule designed to prevent undesirable forms of inter-company financing between holding companies and subsidiaries.
It is now found at Section 113.
There are, however, certain conditions which would allow a subsidiary to acquire and hold shares in its holding company. They are now found in Section 114. This, too, is a re-enactment of existing law.
Briefly, the salient rules are as follows. Firstly, if a subsidiary buys shares in its holding company it must use distributable profits to buy them. Secondly, the subsidiary is not allowed to exercise any voting rights in respect of those shares.
If an insolvent subsidiary is wound up within six months of buying shares in its holding company, the Court may impose liability on the directors. The directors would be liable to repay to the company the total amount paid by the company for the shares. Such an application can be brought by a liquidator, creditor, employee or contributory of the company. The defence is that the director believed on reasonable grounds that the purchase was in the best interests of the company; if that defence is successful, the Court may relieve the director of liability. The defence may only be partially successful, in which case the Court will only relieve the director of a portion of the liability. See here (Section 115).