Companies Act, 1990

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Cancellation of shares on redemption.

208.—Shares redeemed pursuant to this Part may be cancelled on redemption, in which case the following provisions shall apply as respects those shares:

(a) The amount of the company's issued share capital shall be reduced by the nominal value of the shares redeemed but no such cancellation shall be taken as reducing the amount of the company's authorised share capital.

(b) Where the shares are—

(i) redeemed wholly out of the profits available for distribution, or

(ii) redeemed wholly or partly out of the proceeds of a fresh issue and the aggregate amount of those proceeds (disregarding any part of those proceeds used to pay any premium on redemption) is less than the aggregate nominal value of the shares redeemed (“the aggregable difference”),

then a sum equal to, in the case of subparagraph (i), the nominal amount of the shares redeemed and, in the case of subparagraph (ii), the aggregable difference shall be transferred to a reserve fund (“the capital redemption reserve fund”) and the provisions of the Principal Act relating to the reduction of the share capital of a company shall, except as provided in this section, apply as if the capital redemption reserve fund were paid-up share capital of the company.

(c) Where a company—

(i) has redeemed and cancelled shares, or

(ii) is about to redeem shares and cancel them upon redemption,

it shall have the power to issue shares up to the nominal amount of the shares redeemed or to be redeemed as if those shares had never been issued and for the purposes of section 68 of the Finance Act, 1973 , shares issued by a company in place of shares redeemed under this Part shall constitute a chargeable transaction if, but only if, the actual value of the shares so issued exceeds the actual value of the shares redeemed at the date of their redemption and, where the issue of shares does constitute a chargeable transaction for those purposes, the amount on which stamp duty on the relevant statement relating to that transaction is chargeable under section 69 of the Finance Act, 1973 , shall be the difference between—

(I) the amount on which the duty would be so chargeable if the shares had not been issued in place of shares redeemed under this section, and

(II) the value of the shares redeemed at the date of their redemption.

(d) Where new shares are issued before the redemption of the old shares, the new shares shall not, so far as relates to stamp duty, be deemed to have been issued in pursuance of paragraph (c) unless the old shares are redeemed within one month after the issue of the new shares.

(e) The capital redemption reserve fund may, notwithstanding anything in this section, be applied by the company in paying up unissued shares of the company (other than redeemable shares) to be allotted to members of the company as fully paid bonus shares.