ACCA Applied Skills · Corporate and Business Law (Global) · Share capital
Marlo Ltd, a private company, plans an off-market purchase of its own shares from director Pia. Which approval is required for the contract?
An off-market purchase requires members to approve the buyback contract by special resolution beforehand. The selling shareholder, here Pia, may vote but the resolution is not validly passed if it would have failed without her votes.
- AA special resolution approving the contract, with Pia's votes not counting if they carried the resolutionCorrect
- BAn ordinary resolution of the board only
- CNo approval, because the shares are bought from a director
- DUnanimous approval of all creditors
Explanation
An off-market purchase needs the members' prior approval of the contract by special resolution. A member whose shares are to be bought may vote, but the resolution fails if the votes would not have carried it without those votes. A board resolution alone is insufficient.
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