Purchase of own shares - merger accounting, Business Law and Ethics

Purchase Of Own Shares:

Another possible way in which a company's paid-up capital may leave the company other than in the ordinary course of the company's business would be if the company purchased its own shares. It was therefore held in Trevor v Whitworth (48) that it is illegal for a limited company to purchase its own shares. Such a purchase, whether permitted, would constitute an indirect reduction of the paid-up capital with no compliance with the statutory provisions relating to reduction of capital. This is the general rule that is applicable in Kenya. This decision was said to be based on the implied provisions of the English Companies Act 1862. The said provisions were incorporated in the English Companies Act 1948 which in turn became our Companies Act (Cap. 486). It may however be criticized for its assumption that whenever a company buys its shares it would do so by utilizing its paid-up capital. It is in fact possible for a company to buy its shares without using its paid-up capital but using the money from a reserve fund which was constituted for that purpose. Such a purchase might in fact be beneficial to the company which could use it as a mechanism for propping up the market value of its shares at a time when there is panic selling by its shareholders which has been precipitated by adverse rumours about the company. The company would later resell the shares in such a way as to prevent high fluctuations in their market prices.

Posted Date: 1/12/2013 4:15:39 AM | Location : United States







Related Discussions:- Purchase of own shares - merger accounting, Assignment Help, Ask Question on Purchase of own shares - merger accounting, Get Answer, Expert's Help, Purchase of own shares - merger accounting Discussions

Write discussion on Purchase of own shares - merger accounting
Your posts are moderated
Related Questions
David wants to open a restaurant in Melbourne. He engages Robert Boyd Pty Ltd, an architectural firm, to design the restaurant interior and exterior including the layout and positi

Compulsory winding up: At the hearing other creditors of the company may oppose the petition.  If so, the court is likely to decide in favour of those to whom the larger amoun

What is Codifying treaty Codifying treaty, meaning whereby, certain existing customary laws are codified in order to develop international law and make it binding between the s

What is the composition of the legislature Given the composition of the legislature, the strategic voting, the possibility under which the policies and their economic outcomes

Delays: However certain standard defences knows as "essoins" caused considerable delay earlier than a case could be heard.  Now for a certain condition like the hearing of a c

Ways which affect the behaviour of the policy maker There may be at least three ways this uncertainty may affect the behaviour of the policy maker. a) He may chose mainly th

Corporation Aggregate - Types of Corporations However this is a legal entity formed through at least two people and whose membership at any one time legally concludes of a

Hi Dear, Could you please do my online quiz in Business Law. This is a 10 question quiz, made up of a combination of multiple choice and true/false type questions. You have 12 min

Appointment of Directors: In the absence of other provisions in a company's articles, the directors of the company would be appointed in accordance with the following provisio

What is UDHR UDHR is therefore, considered as a source of international law relating to human rights. Apart from UNGA-responsible for issuing resolutions, the decisions of the