The Gazette 1992

GAZETTE

JUNE 1992

A Company Purchasing its Own Shares by Frank Brennan (Brilton Publications, £34.75, 290pp, hardback). Legal rules for the maintenance of the issued share capital of a limited liability company can be traced back more than one hundred years to the decision of the House of Lords in the case of Trevor -v- Whitworth. The primary objection to the depletion of issued share capital is However, other jurisdictions enable companies to purchase their own shares subject to safeguards. Capital may be returned to a shareholder who wishes to leave the business. At the same time existing shareholders need not buy the shares (they may not have the money or inclination to increase their stake) or run the risk of a sale to a third party. In the area of the quoted company, buyback schemes are relatively common in the USA where they enable companies to reduce the number of shares in issue, thereby increasing the asset value per share ratio and (hopefully) increasing the share price. The EC Second Directive on Company Law contemplates corporate entities being allowed to purchase their own shares. In England the Companies Act, 1981 enabled limited liability companies to purchase or redeem their own shares. Part XI of our own Companies Act, 1990 which was brought into force on 1 July, 1991 now allows for acquisition of own shares and shares in one's holding company. The provisions are somewhat intricate and, while similar, are not the same as those contained in the English legislation. In this book Frank Brennan seeks to provide a comprehensive guide to not only Part XI of the Companies Act, 1991, but also provides suitable references to English law, in that it constitutes the ultimate recourse for the creditors of a limited liability company.

particular, where it differs from Part XI. For example, our law enables existing shares to be re-designated as redeemable shares and allows redeemed shares to be retained as treasury shares. English law has no equivalent provisions. Mr. Brennan endeavours to outline the legislative, accountancy, tax and company secretarial requirements in detail. To illuminate what is a technical but very practical subject he gives examples throughout the text and rounds off his discussion with two case studies. There are also very useful checklists at the end of the book. Whilst only affecting quoted companies, it might be useful in the next edition of this book to make reference to guidelines of investor protection bodies such as the Irish Association of Investment Managers and to interrelate these guidelines with the requirements of the Stock Exchange. The legal practitioner might be tempted to limit his or her reading to the chapter dealing with the legislative position and company secretarial requirements. However, this would be a mistake because much relevant information is to be found in the other chapters. The second case study shows how Part XI might be used to fund Capital Acquisitions Thx liabilities on a death while minimising adverse tax consequences of the funding procedure. The author emphasises that redemption and purchase of shares are two distinct procedures with different legal and tax consequences. For example, a company may purchase any shares provided the issued share capital after purchase consists of at least 10% non- redeemable shares. A company may only redeem shares designated as redeemable. A purchase by a company may be regarded by the Revenue Commissioners as a stampable transaction subject to 1% duty whereas a redemption would not. The treatment for Corporation Tax purposes of the payment made

may differ depending on whether a redemption or purchase has occurred. This pioneering work combining legal, accounting and tax learning with practical hints and precedents will be very valuable to any practitioner engaged in advising on any aspect of corporate law.

Kevin Hoy

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Report on the Reform of the Civil Law of Defamation

(Dublin, The Law Reform Commission, £7.00, 143pp, paperback).

The road to law reform in Ireland is long and tortuous. Reform of the law of defamation has reached an important halting post on this journey. Following a request in January 1988 from the Attorney General, the Law Reform Commission in 1991 published Consultation Papers outlining the present law of civil defamation, criminal defamation, and contempt of court, tentatively suggesting reform and inviting comments. The Consultation Paper on the Civil Law of Defamation was widely welcomed, and occasioned much discussion. On the basis of its own tentative proposals in the Consultation Paper and of the submissions which were made upon it, the Law Reform Commission has now published its Report on the Reform of the Civil Law of Defamation (the Report). It is a well thought out and compelling document. Irish law of defamation will be changed radically if its proposals become law. They practical coherence. They are shaped by an appreciation of the protection of the various aspects of the rights to free speech, communication and good name in the Irish Constitution and under the European Convention on Human Rights. This appreciation is a welcome development in the Report as it was markedly absent from the Paper. ably meet the requirements of constitutional consistency and

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