Case Development: Regulatory Requirements Governing Share Buy-Backs

Share buy-backs are governed by section 48 of the Companies Act, 2008 ("the Act"), allowing for a company to acquire its own shares in issue subject to passing prescribed solvency and liquidity requirements in the Act. If executed properly, the transfer would usually not give rise to a capital gain which makes such transactions an attractive alternative to a sale of shares from a corporate tax planning perspective.

This post aims to briefly analyse the development to our company legislation following the decision in First National Nominees (Pty) Ltd v Capital Appreciation Ltd (19/41679) [2021] ZAGPJHC 17, as well as to briefly consider the possible impact that the new Companies Bill, 2021 may have on the statutory formalities for this type of transaction.