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
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.
Last updated: 18 Aug 2015