One of the methods by which a company can reduce its issued capital and return value to shareholders. A company conducts a share buy-back by:

A share buy-back is an exception to the general rule that a company may not purchase shares in itself. The key feature of a buy-back is that shareholders to whom a buy-back offer is made can choose whether or not to sell their shares.

The Corporations Act 2001 (Cth) (CA 2001) sets out the types of share buy-back a company may undertake, as follows:

A company wishing to undertake any one of the above types of share buy-back must comply with the CA 2001 when doing so (see section 256A and sections 257B-257J of the CA 2001).

Another commonly used method by which a company can reduce its share capital is through a reduction of share capital. Unlike a share buy-back, a reduction of share capital allows a company to reduce its issued capital without the need for each individual shareholder's consent. A company's decision on whether to undertake a share buy-back or a reduction of share capital is often driven in part by tax considerations.

For information about share buy-backs, see Practice notes, Share buy-backs: unlisted companies and Share buy-backs: ASX-listed companies.

For information about reductions of share capital, see Practice notes, Reduction of share capital: unlisted companies and Reduction of share capital: ASX-listed companies.

See also Practical Law's topic: Share buy-backs.