Companies Act 2006 s.658 – General rule against limited company acquiring its own shares

(1)A limited company must not acquire its own shares, whether by purchase, subscription or otherwise, except in accordance with the provisions of this Part.

(2)If a company purports to act in contravention of this section—

(a)an offence is committed by—

(i)the company, and

(ii)every officer of the company who is in default, and

(b)the purported acquisition is void.

(3)A person guilty of an offence under this section is liable—

(a)on conviction on indictment, to imprisonment for a term not exceeding two years or a fine (or both);

(b)on summary conviction—

(i)in England and Wales, to imprisonment for a term not exceeding twelve months or a fine not exceeding the statutory maximum (or both);

(ii)in Scotland or Northern Ireland, to imprisonment for a term not exceeding six months or a fine not exceeding the statutory maximum (or both).

Read section 658 in the full Act → Definitions (3) Cases (3)

Definitions used in section 658

company: “company” means a company formed and registered under this Act, that is—

(a)
a company so formed and registered after the commencement of this Part, or

(b)
a company that immediately before the commencement of this Part—
(i)
was formed and registered under the Companies Act 1985 (c. 6) or the Companies (Northern Ireland) Order 1986 (S.I. 1986/1032 (N.I. 6)), or

(ii)
was an existing company for the purposes of that Act or that Order,

(which is to be treated on commencement as if formed and registered under this Act).

Defined in s.1(1) · see it in the full Act; (4) In this section and that Schedule “company” includes any body corporate.
Defined in s.1159(4) · see it in the full Act
share: (1) In the Companies Acts “share”, in relation to a company, means share in the company's share capital.
Defined in s.540(1) · see it in the full Act
officer: “officer”, in relation to a body corporate, includes a director, manager or secretary;
Defined in s.1173(1) · see it in the full Act

Cases considering section 658 (3)

Sudicka v Morgan & Ors

[2019] EWHC 311 (Ch) · 27 February 2019

Applies section 658(2)(b) in finding that the proposed company purchase of Cotton’s shares was void for non-compliance. The court nevertheless granted equitable relief based on estoppel between the relevant parties. (see paras [58], [74])

Chaggar v Chaggar & Anor

[2018] EWHC 1203 (QB) · 18 May 2018Interprets

Section 658(1) prohibits a limited company acquiring its own shares except in accordance with Part 18 and makes a purported acquisition void. The ISA contemplated such an acquisition, but the prohibition applied only to performance funded by the Company; lawful performance by Raghbir remained available. (see paras [216]; [224]-[226]; [232])

Dickinson & Anor v NAL Realisations (Staffordshire) Ltd & Anor

[2019] EWCA Civ 2146 · 3 December 2019

Applies the general prohibition on a company acquiring its own shares except in accordance with Part 18, providing the statutory setting for the voidness consequence. (see para [50]) Confirms that a limited company must not acquire its own shares except in accordance with Part 18. The provision frames the statutory invalidity of a non-compliant acquisition. (see para [50]) Confirms that a purported acquisition in contravention of the statutory prohibition is void. The Court applied the related payment requirement in section 691 to the buy-back. (see paras [50]; [60])

What each judgment says about section 658 is in the case-law panel in the full Act.

Amendments and notes

1 notes from legislation.gov.uk

Modifications

C1109S. 658 excluded (E.W.S.) by The Open-Ended Investment Companies Regulations 2001 (S.I. 2001/1228), reg. 11B (as inserted (21.12.2011) by The Open-Ended Investment Companies (Amendment) Regulations 2011 (S.I. 2011/3049), regs. 1, 3(3) (with reg. 10(1)))