Managing shares is an important part of running a company. There are many ways in which shares can be managed in order to increase the individual value of shares.
A Share Buyback Agreement lets you buy back your shares in certain situations. It can be a highly useful tool for increasing value and reinvesting in your business.
What Is A Share Buyback Agreement?
A Share Buyback Agreement is a legal contract — often set out within the company’s Shareholders Agreement or constitution — which allows the company to buy back its shares from all or some of its shareholders in certain situations.
Share buybacks are regulated by the Australian Securities and Investments Commission (ASIC). There are multiple ways and procedures in which the buyback can be validly done. These include:
- Equal access buybacks
- On-market buybacks
- Employee share scheme buybacks
- Selective buybacks
- Minimum holding (or ‘odd lot’) buybacks
Each of these processes involve different rules and it can be hard to know which one is most useful for your business’ unique situation. A good lawyer can help you navigate this.
Why Do I Need A Share Buyback Agreement?
If you are looking to control your business’ share structure and value, a Share Buyback Agreement will give you this control by allowing you to buyback shares in certain situations.
This can be useful in order to increase the value of each individual share by reducing the number of shares in your company. Or it may just be a necessary step to take in situations such as a company shareholder becoming insolvent, or when a shareholder leaves.
Having a pre-made Share Buyback Agreement between your company and its shareholders is really useful, as it clearly outlines how shares are managed in these situations. This can save a lot of hassle, time and money in the long run. But it is also a very procedural process: laws and ASIC regulations must be complied with when you’re putting together this agreement.
What Is Included In A Share Buyback Agreement?
A Share Buyback Agreement typically includes clauses regarding:
- Parties involved
- Number of shares
- Price of shares
- Representations on behalf of both parties
A good lawyer will be able to draft your Share Buyback Agreement to ensure that your business is complying with all the relevant rules and ASIC regulations when buying back shares. Furthermore, getting legal advice on the best version of buyback to use for your business ensures you’re putting together the most favourable deal for your business.
At Sprintlaw, we focus on drafting comprehensive, easy to understand and user-friendly agreements for businesses.
Feel free to get in touch with us to get things started with your Share Buyback Agreement! Our friendly team can be reached at 1800 730 617 or at firstname.lastname@example.org for a free, no obligations chat.
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