Share buy-backs

Buying back the business

In a share buy-back, a company makes you an offer to buy back some of its own shares. This is done to reduce the number of shares available and thereby increase their individual value.

You have the right to refuse this offer. Here are some general tips to help you make your decision.

Find out why the company wants to buy back its shares

The company will send you a document offering to buy back some or all of your shares. It will explain why it is making the offer and the steps it is taking to do this. In some cases, shareholders may be required to approve the share buy-back.

A company may want to buy back its shares to:

  • Distribute surplus money back to shareholders
  • Reduce administrative costs in a listed company by buying out holders of small parcels of shares
  • Enable a shareholder of a small company, who wants to sell their shares, to be bought out

Consider if it is a good time to sell

If you are happy with the company's future prospects, you may decide to keep your shares. You are not obliged to sell.

However, if you were thinking of selling your shares anyway, selling them back to the company as part of a share buy-back offer will save you paying broker's fees.

The company may also make special arrangements with the Australian Taxation Office to reduce the amount of capital gains tax you will pay if you sell your shares back to the company. If it has made these arrangements, it will tell you in the buy-back document.

Selling your shares back to a company may be a good move if you were thinking of selling anyway. But ask for professional financial advice or discuss with your accountant if you are unsure of what to do.

Related links

Last updated: 18 Aug 2015