Company Share Buy Back

A

Andrea21

Registered User
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Hi All,

We are looking to run a company share buy-back to allow a few shareholders to exit the company and take advantage of the tax rules. Two questions if people have experience in this before:

1. Is it true you need to have held the share for a minimum of 5 years and (aside from inheritance etc.) is there no way around this? (We have held them for 4 yrs)
2. Is this process something that can be easily managed by oneself or should you get professional help (i.e. is it easy to get wrong for tax or legal reasons)

Thanks for the help.
 
Last edited:
In answer to your queries:

1. The five year holding period is required and I'm not aware there is anyway around this.
2. This process is complicated and you will need to satisfy the trade benefit test which is essentially a subjective Revenue test. There are multiple conditions contained in sections 176 to 186 TCA and all of these need to be considered. Typically an accountant/tax consultant will work in conjunction with a corporate solicitor/company secretary. If any of the conditions are not met the results can be detrimental in tax terms - you could be looking at 55% as opposed to 10%/33% depending on the circumstances.
 
Thanks a lot @dublin67. I sort of guessed as much. We basically have cash in the company and a few shareholders want to exit and do it the as tax efficiently as possible. The amount is small enough that we can even sell the shares at a loss or at issue value and still get it all out. Any thoughts as it seems that a buy-back is no longer a short term option?
 
You will be fine if you redeeming/buying the shares at the amount the shareholders subscribed for them. If, for example, they paid €5 per share (whether it be for the share or share premium) and all they are getting back is €5 then there is no issue. Income tax only arises if the buyback price per share exceeds what the individuals paid the company for the share.
 
Ok, so in that instance the 5 year rule is no longer an issue? (i.e. we can run a buy-back now - shares only held for 4 years but the price the company will buy back at is the same or lower than the initial subscription value)
 
This should be fine. The crucial matter is that any payment exceeding the nominal value of the share (including share premium) is a dividend. If all you are doing is returning capital then no tax issues. I'd recommend that you contact a company secretarial firm to do the paperwork as you may have to deal with the issue of financing of acquisition of a company's own shares
 
Thats great. Thanks a million for your help. Will find a secretarial firm as you say to make sure the paperwork is done properly.
 
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