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Raulin Amy
Partner | Legal
Jersey
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Raulin Amy
Partner
Jersey
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Jersey law now permits the monies payable on the redemption of redeemable shares or on the purchase by a Jersey company of its own shares to be funded from any source, including capital. This gives Jersey companies a considerable degree of flexibility in structuring returns to investors.
This briefing summarises the requirements for a redemption of shares in a Jersey company and the purchase by a Jersey company of its own shares.
The redemption of shares by a Jersey company is permitted by article 55 of the Companies (Jersey) Law 1991 (the ‘Law’). Generally, a company may issue redeemable shares or convert existing non-redeemable shares into redeemable shares if authorised to do so by its articles.
However, redeemable limited shares may not be issued at a time when there are no issued shares of the company which are not redeemable and no existing issued non-redeemable limited shares may be converted into redeemable shares if as a result there would be no issued shares of the company which are not redeemable.
Article 57 of the Law allows a Jersey company to purchase its own shares, whether they are redeemable or not, provided that the purchase is sanctioned by a special resolution. (This sanction is not needed if the Jersey Company is a wholly-owned subsidiary of another Jersey company.)
If the shares are to be purchased other than on a stock exchange:
If the shares are to be purchased on a stock exchange, the resolution authorising the purchase must specify:
A company may not purchase its shares under Article 57 if as a result of the purchase there would no longer be a member of the company holding shares other than redeemable shares or treasury shares.
The monies payable on the redemption of redeemable shares or on the purchase of its own shares by a Jersey company (whether a par or no par value company) may be funded from any source, including capital, provided that such shares are fully paid.
In the case of both redemption and purchase of the company’s own shares, the directors of the company responsible for authorising the redemption or purchase payment will be required to make a statement that they have formed the opinion:
the company will be able to:
until the expiry of the period of 12 months immediately following the date on which the payment is proposed to be made (or, if sooner, a summary winding up of the company).
A director who makes a statement without having reasonable grounds for the opinion expressed in the statement is guilty of an offence.
Where a company is being wound up in a creditors' winding up in which the realisable value of the company's assets are not sufficient for the payment of its liabilities and the expenses of the winding up, and the company has within 12 months before the commencement of the winding up made an unlawful payment in respect of the redemption or purchase of its own shares, a person from whom the shares were redeemed or purchased or a director may be ordered by the court to contribute to the assets of the company.
A person's contribution is limited to such amount of the redemption or purchase payment which was made unlawfully.
However, a person would not be liable to contribute under these provisions unless the court is satisfied that, when payment for the shares was received:
that, immediately after the relevant payment was made, the company would be unable to discharge its liabilities as they fell due and that the realisable value of the company's assets would be less than the aggregate of its liabilities.
A director who makes a solvency statement in connection with the redemption or purchase may also be ordered to contribute to the assets of the company in these circumstances unless the court is satisfied that the director had grounds for the opinion expressed.
Different rules apply to the redemption or purchase of shares of an open-ended investment company and specific advice should be sought in relation to such companies.
Raulin Amy
Partner | Legal
Jersey
Raulin Amy
Partner
Jersey
Simon Dinning
Partner | Legal
Jersey, London
Simon Dinning
Partner
Jersey, London
Nathan Powell
Partner 合伙人 | Legal
Hong Kong
Nathan Powell
Partner 合伙人
Hong Kong
Ogier is a professional services firm with the knowledge and expertise to handle the most demanding and complex transactions and provide expert, efficient and cost-effective services to all our clients. We regularly win awards for the quality of our client service, our work and our people.
This client briefing has been prepared for clients and professional associates of Ogier. The information and expressions of opinion which it contains are not intended to be a comprehensive study or to provide legal advice and should not be treated as a substitute for specific advice concerning individual situations.
Regulatory information can be found under Legal Notice
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