Thinking about running a share buy-back in Australia? Whether you’re buying out a departing founder, simplifying your cap table, or returning capital to investors, a well-run buy-back can be a smart strategic move – provided you follow the legal steps carefully.
Our corporate lawyers help Australian private and unlisted companies plan, structure and complete compliant share buy-backs from start to finish. Here’s what you need to know about the process, required documents, approvals, and timing.
What is a Share Buy-Back?
A share buy-back is when a company buys its own shares from one or more shareholders and cancels them. This reduces the total shares on issue and can rebalance ownership or streamline the shareholder base.
Unlike a dividend, which distributes profits to all shareholders, a buy-back targets specific shares. Companies undertake share buy-backs for various reasons, including to help a founder or investor exit, remove inactive or small shareholders, improve control, or simplify governance.
Share buy-backs can be undertaken by both listed and unlisted companies. This article focuses on share buy-backs for unlisted companies.
The Main Types of Share Buy-Backs
Under the Corporations Act 2001, private companies can use several forms of buy-backs. The two most common for SMEs are:
- Equal Access Buy-Back – all shareholders are offered the same terms and a pro-rata opportunity to sell their shares.
- Selective Buy-Back – the company buys shares from a specific shareholder (for example, an exiting director, founder, or investor). This requires special shareholder approval and more formal documentation.
Other forms such as employee share scheme buy-backs, minimum holding buy-backs and on-market buy-backs apply in more limited or listed-company contexts.
Our Step-by-Step Guide: How to Run a Compliant Buy-Back
Running a buy-back involves several key steps that must be followed carefully to stay compliant and avoid delays. The exact process and approvals required will depend on the type of buy-back you choose.
Here’s how the process typically works for private unlisted Australian companies.
- Step 1: Define your objective and buy-back type
Clarify the purpose of the buy-back – for example, to exit a shareholder, simplify ownership, or return surplus capital – and identify the appropriate buy-back structure (equal access, selective, or another type). The structure and approval requirements depend not only on the purpose of the buy-back but also on how many shares the company intends to buy back within a 12-month period, as different thresholds and rules apply. The type of buy-back selected also determines the approval, lodgement and notice requirements, so it’s an important first step!
- Check your constitution and shareholder agreements
Review your Company Constitution and any Shareholders Agreement to ensure buy-backs are permitted and to identify any restrictions, approval thresholds or special procedures that must be followed.
- Set price and funding source
Work with your accountant to confirm a fair price for the shares and decide how the buy-back will be funded – for example, from retained earnings or share capital. You can read more about how shares are valued for private companies here.
- Confirm solvency
Ensure the company is solvent both before and after the buy-back, and that the transaction will not materially prejudice its ability to pay debts as they fall due. Directors should be satisfied the company remains in a strong financial position before proceeding. Directors can be held personally liable if a buy-back causes a company to become insolvent.
- Prepare the draft documentation
Before seeking approvals, have the necessary documents drafted, these typically include the required ASIC notification forms, a buy-back agreement, board and shareholder resolutions, minutes, and a explanatory statement for shareholders (for selective buy-backs). Our corporate lawyers can help prepare all of these documents for you to ensure they meet the requirements of the Corporations Act and align with your company’s constitution and shareholder arrangements.
- Notify ASIC of the buy-back
Before proceeding with any buy-back, the company must notify ASIC and lodge the required form and supporting documents. The correct form depends on the type of buy-back:
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- Form 280 – Notification of share buy-back details (used for selective buy-back and equal access requiring shareholder approval); or
- Form 281 – Notice of Intention to Carry Out a Share Buy-Back (generally used for other buy-backs within the 10/12 limit, employee share scheme buy-backs, or if the company wants to shorten the 14-day notice period).
If shareholder approval is required, Form 280 and all related materials (such as the notice of meeting and explanatory statement) must be lodged with ASIC before they are sent to shareholders. ASIC must receive these documents at least 14 days before the resolution is passed or any buy-back agreement is entered into.
- Obtain proper approvals
Conduct the required meetings or circulate the resolutions (depending on what your constitution and shareholders agreement allow) to formally approve the buy-back. This includes:
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- passing a Board resolution to propose and approve the buy-back; and
- may include passing a Shareholder resolution to approve the buy-back (ordinary or special depending on the type of buy-back). If a shareholders meeting is held, ensure votes are properly recorded, and note any abstentions.
- Complete the transaction
After the applicable ASIC notice period has passed and all required approvals have been obtained, the company and the participating shareholder(s) may enter into and sign the buy-back agreement to complete the transaction.
- Cancel Shares and notify ASIC
Once the buy-back is completed, the repurchased shares must be cancelled and the company’s share register updated to reflect the change. ASIC must then be notified of the cancellation within one month, which can be done online via ASIC’s portal: Change to Company Details.
- Keep detailed records
For regulatory and tax compliance, ensure you keep proper records of the buy-back. This includes signed minutes, resolutions, buy-back agreements, proof of payment, and an updated share register showing the cancelled shares.
Frequently Asked Questions About Share Buy-Backs
- What’s the difference between a share buy-back and a share transfer?
A share buy-back is when the company itself repurchases shares and cancels them. A share transfer involves one shareholder selling shares to another person or entity. Both can be used to change ownership, but only a share buy-back reduces the company’s issued capital.
- Do I need ASIC approval for a buy-back?
You don’t need ASIC’s formal approval to carry out a share buy-back.
However, you must lodge the correct share buy-back form and associated documents within the required timeframes, and ASIC can object if it identifies a compliance concern. It is therefore essential that your documentation, timing, and procedures are accurate and the buy-back process is properly managed.
- Can the 14-day ASIC notice period be shortened?
Yes – but only if ASIC agrees.
Normally, a company must wait at least 14 days after lodging Form 280 (Notification of Share Buy-Back Details) before passing the shareholder resolution or signing the buy-back agreement.
If you need to complete the share buy-back sooner, you can apply to shorten this period by lodging Form 281 (Notice of Intention to Carry Out a Share Buy-Back) with ASIC. ASIC will consider the request and may allow a reduced timeframe if it’s satisfied the change won’t disadvantage creditors or shareholders.
- How long does the process take?
For most private companies, a share buy-back takes around three to five weeks from board approval to completion, allowing time for ASIC’s 14-day notice period and shareholder approvals.If the buy-back is being conducted under a Form 281 notice (for smaller or ongoing buy-backs), the company has up to 12 months from lodgement to complete it.
- Can a company buy back all of a shareholder’s shares?
Yes – a company can buy back all of a shareholder’s shares if the buy-back terms and approvals permit it. This is common when a shareholder wishes to exit the company entirely.
However, the company must ensure the buy-back does not affect solvency, unfairly prejudice minority shareholders, and is conducted in line with the company’s constitution and any shareholders agreement.
- What are the most common mistakes companies make when running a buy-back?
The rules on how to conduct buy-backs must be followed strictly. Our corporate lawyers can help you avoid these common pitfalls:
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- Failing to confirm solvency before and after the buy-back, exposing directors to potential breach of duty.
- Not obtaining a valuation or pricing justification, which can create fairness and compliance risks.
- Missing key deadlines, such as the ASIC 14-day notice period or the 28-day post-completion lodgement.
- Allowing an interested shareholder to vote on a buy-back that affects their own shares.
- Leaving out required details in the shareholder notice of meeting or explanatory statement.
- Overlooking restrictions or special approvals in the company’s constitution or shareholders agreement.
- Not keeping proper records, including evidence of how the price and funding were determined.
- Not cancelling the shares or updating the share register once the buy-back is completed.
- What makes selective buy-backs so popular with private companies?
Selective share buy-backs are often the most practical option for private companies because they offer a targeted and flexible way to buy out a specific shareholder such as a retiring founder, departing investor, or business partner who wants to exit.
Selective share buy-backs allow the company to negotiate the terms directly with the exiting shareholder, including price and timing, without having to make the same offer to everyone else. This makes the process simpler, faster, and more cost-effective than an equal access share buy-back.
A selective buy-back also helps maintain control and stability within the remaining ownership group and avoids unnecessary dilution.
- Why might a company choose an equal access buy-back?
An equal access share buy-back is often chosen when the company wants to treat all shareholders equally. For example, a company may wish to return surplus cash, reduce the number of shareholders, or adjust the capital structure without favouring anyone.
In an equal access buy-back, the company makes the same offer to every shareholder on identical terms, allowing each to sell back a proportional number of shares if they wish. This approach is usually simpler to approve, as it only requires an ordinary resolution, and it helps maintain fairness and transparency between shareholders.
Equal access buy-backs are common where there’s no specific shareholder exit, but the company wants to manage its capital or reward all shareholders in a balanced way.
- Can private companies use buy-backs for employee share schemes?
Yes. A private company can use a buy-back to manage shares issued under an employee share or incentive scheme. This type of buy-back allows the company to repurchase shares from employees or former employees when they leave or when scheme conditions are met.
It’s a practical way to keep ownership within the company group and avoid having ex-employees remain as shareholders. The process must still comply with the buy-back rules and any restrictions in the company’s constitution or shareholders agreement. The terms of the employee share plan must also be considered.
We assist clients with all aspects of employee share plans, including structuring, documentation, compliance and buy-backs. If you are interested in employee share schemes you can check out our other insights on The Dangers of Out-of-Date ESOPs, How Listed Entities Are Falling Foul of the New ESS Regime, and Embrace Change: Why You Need to Update Your Australian Employee Share Option Plan.
- What documents are legally required?
The documents and forms required for a buy-back depend on the structure of the transaction, but generally include:
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- Board resolutions – to approve the buy-back proposal and confirm the company remains solvent (the form depends on your Company Constitution and any Shareholders Agreement).
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- Shareholder circular resolutions or a formal notice of meeting (the approach depends on what your constitution and shareholders agreement permits). For selective buy-backs, shareholders must first receive a short explanatory statement summarising the key terms, reasons and effect of the buy-back.
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- Buy-back offer or agreement – the written offer or contract between the company and selling shareholder(s).
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- Offer terms and explanatory material – any documents that will accompany the offer or notice to shareholders.
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- ASIC forms, which may include: Form 280 – Notification of Share Buy-Back Details; Form 281 – Notice of Intention to Carry Out a Share Buy-Back; and Change to Company Details.
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- Updated share register and records of decisions – minutes or signed resolutions (depending on whether meetings were held).
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- Proof of payment and supporting calculations or valuation – to demonstrate that the buy-back price was fair and that the company remained solvent.
- Can a share buy-back be done without paying cash?
Yes, a company may buy back shares using non-cash consideration (for example, by transferring assets or offsetting a debt). However, ASIC cautions that this approach carries higher risks and responsibilities for directors.
Valuing non-cash assets and providing sufficient disclosure about them is more complex than for cash buy-backs, and any errors could expose directors to greater liability. Non-cash consideration is most commonly used in selective buy-backs, often involving related parties, which means directors must take extra care to ensure the transaction is fair, properly valued, and fully disclosed.
- How are share buy-backs taxed?
The tax treatment of a buy-back depends on how it’s funded – from profits, share capital, or a mix of both. Part or all of the payment may be treated as a dividend, a capital payment, or a combination of the two. You can read more about how buy-backs are taxed on the ATO’s website.
Adventum Legal works with your accountant to ensure the documentation supports the intended tax outcome and minimises exposure.
- Does ASIC have any guidance materials?
Yes. ASIC’s Regulatory Guide 110 provides a helpful guidance of company share buy-backs, including the different types, approval requirements and lodgement obligations.
Need help with a share buy-back?
A share buy-back has both legal and tax implications. Adventum Legal works hand-in-hand with your accountant to confirm the accounting treatment and solvency position, determine the correct tax outcome, and align documentation with your reporting obligations. Whether you’re restructuring ownership or facilitating an investor exit, we make the process clear, timely and stress-free.
Adventum Legal specialises in corporate governance and capital management for private companies.
Get in touch today for tailored advice to support on your share buy-back.
