With electronic lodgement for share buy-back documents now available with ASIC, this article provides a brief refresher on the process, key timelines, and other important information for companies considering reducing their issued capital by way of a share buy-back.
What is a share buy-back?
A general rule is that a company cannot purchase its own shares. However, there are some circumstances where a company can offer to buy back shares from its existing shareholders.
The Corporations Act 2001 (Cth) outlines the process for both private and public companies buying back their own shares, and the different types of share buy-backs available.
What are the types of share buy-backs?
Companies can undertake different types of share buy-backs depending on their specific needs.
Equal Access Buy-Back
An equal access buy-back is where a company offers to buy back shares from all shareholders on the same terms, typically at a fixed price or via a tender process, ensuring fairness. This is often considered the simplest way to execute a buy-back, and once completed, the shares must be cancelled.
Selective Buy-Back
A selective buy-back is where a company offers to buy shares from only select shareholders. This is more complex than an equal access buy-back as it requires approval from at least 75% of shareholders. Importantly, any approval from shareholders can only be obtained by those who are not selling their shares.
A selective buy-back most commonly occurs where there is a restructure of a company, or to settle a dispute. The shares must then be cancelled upon completion.
Employee Share Scheme Buy-Back
An employee share scheme buy-back is where a company buys back shares that are held by employees or directors of the company. Generally speaking, an employee share buy-back will occur when an employee or director leaves the company, forfeits their shares, or exercises an option for the company to buy-back their shares.
Shares bought back under an employee share scheme do not necessarily need to be cancelled. They can be held for future distribution, depending on the company’s plans.
On-Market (or continuous) Buy-Back (public companies only)
An on-market buy-back is where a listed company buys its own shares through the securities exchange during normal trading, serving as an indirect way to gradually reduce its share capital.
Shares purchased through an on-market buy-back are acquired at market price and must follow the rules of the securities exchange and may include a cancellation of those shares.
Minimum Holding Buy-Back (public companies only)
A minimum-holding buy-back is where a company buys back shares that are deemed ‘less than a marketable parcel’. Where this occurs, the company is required to cancel those shares so that they cannot be re-sold or held by any other shareholders.
When might a buy-back be needed?
Companies commonly undertake share buy-backs to:
- enhance the value of their earnings per share, often benefiting remaining shareholders through a greater ownership percentage and return; or
- as part of a restructure.
However, there are other reasons why a buy-back might be attractive, including:
- to modify the company’s capital structure;
- to prevent hostile takeovers where a major shareholder might gain a controlling interest; or
- to provide an exit option for members wishing to leave the company.
What is the required buy-back process under the Corporations Act?
A company can buy back its shares as long as it does not materially harm its ability to pay creditors, and the process complies with the Corporations Act. ASIC can take enforcement action if it identifies issues such as deficient documents, procedural breaches, or other unacceptable circumstances, as non-compliance is prohibited.
Further, if a company intends to buy back more than 10% of its shares within a 12-month period, stricter rules and requirements apply (known as the ‘10/12 limit’). However, the buy-back process will differ if no shareholder approval is required.
While exact requirements vary by buy-back type, the following general process applies:
- Share Buy-Back Agreement. The terms of any buy-back, such as purchase price, completion timeline, and relevant conditions, should always be documented in a Buy-Back Agreement.
- Disclosure documents. Where shareholder approval is required, the company must prepare an information memorandum (or similar document) containing all relevant information for shareholders to consider the buy-back.
- Notification to ASIC. At least 14 days prior to the shareholders of the company being notified of a vote on a buy-back and the directors execute the Buy-Back Agreement, there are forms that must be lodged with ASIC. These forms must be lodged together with the information memorandum, the Buy-Back Agreement and any other documents relevant to the proposed transaction.
- Notification to, and approval of Shareholders. Once the 14 day period has passed, shareholders can be provided with the previously prepared documents. Shareholders can be asked to vote at a general meeting of the company, in which case they must follow the typical notice requirements for holding a general meeting under the company’s constitution and/or the Corporations Act.
Alternatively, the decision can be made by way of a circular resolution, which doesn’t require a notice period. In this case, the resolution will be passed when the last shareholder signs it.
- Once the required resolutions are passed and subject to any other conditions of the Buy-back Agreement, the buy-back can occur.
- Depending on the type of buy-back, if the shares are to be cancelled, this must occur immediately upon the shares returning to the company.
- Final Notice to ASIC. ASIC must be formally notified of the share cancellation within 1 month after the cancellation date.
Direct to Inbox!
As of August 2025, ASIC now allows buy-back forms and accompanying documents to be sent via email instead of post. This means buy-back forms no longer need to be lodged in ‘wet ink’, providing more certainty as to ASIC’s receipt of documents, helping companies comply with the 14-day lodgement period.
If you require assistance with a share buy-back or have any questions about the process, reach out to our Commercial Team.
