Commentary Part 18: Acquisition by Limited Company of Its Own Shares Chapter 3: Redeemable Shares Section 685: Terms and manner of redemption
998.This replaces section 160(3) of the 1985 Act (which provides that the terms and manner of redemption must be set out in the company’s articles) and existing section 159A (also entitled “terms and manner of redemption”), which was inserted into the 1985 Act by section 133 of the Companies Act 1989 and remains uncommenced.
999.As recommended by the CLR (Final Report, paragraph 4.5), this section enables the directors of both private and public companies alike to determine the terms, conditions and manner of a redemption of redeemable shares. The power conferred on the directors by this section requires prior authorisation by the company’s members, either by resolution of the company or through the articles (see subsection (1)). As recommended by the CLR (Final Report, paragraph 7.30) the terms and conditions of redemption will have to be stated in the statement of capital required to be filed under section 555. If the directors are not authorised to set the terms of the redemption, then they must be set out in the company’s articles (seesubsection (4)).
1000.Where the directors exercise this power they must do so before the shares in question are allotted (see subsection (3)).