A public company may only purchase its own shares using retained distributable profits.
A private company can purchase its own shares even when it does not have sufficient distributable profits, but special rules apply. The directors must make a declaration to Companies House that the company does not risk immediate insolvency, and will be able to continue as a going concern for the next year. This declaration must be supported by an auditors' report. Creditors have rights to object to the buy-back, which means that special time limits apply (see question 5). Legal advice will always be required.
