Company share buybacks often play an important role in succession planning for owner-managed businesses. Typically, the owner manager will sell all his shares back to the company under a purchase of own shares (POS) transaction. These shares are normally cancelled leaving the next generation or the senior management team in place as the new owners of the company.

Financing a significant POS is not always easy. Company law demands that the purchase price for the shares bought back by the company is paid immediately (s691(2) Companies Act 2006 (CA 2006)), although there is a limited exception to this rule where shares are purchased for the purposes of an employee share scheme.