Companies Act 2014 section 110

Incidental payments with respect to acquisition of own shares

Section 110 requires that any incidental payments a company makes in connection with acquiring its own shares must be funded from distributable profits (or, where permitted, from the proceeds of a new share issue), and sets out the consequences if this requirement is not met.

• Payments for acquiring rights to purchase own shares, varying a share purchase contract, or being released from obligations under such a contract must come from distributable profits or, where allowed, from the proceeds of a new share issue
• If incidental payments are not properly funded, any subsequent purchase of own shares under the relevant contract is unlawful
• Where a contract variation triggers the breach, any purchase made after the variation is unlawful
• Where the breach relates to a release from obligations, the purported release is void and has no legal effect