Return of capital and share buy-backs
Return capital to your shareholders correctly and tax-effectively.
Return of capital and share buy-backs
What is the difference between a return of capital and a dividend?
What is a selective capital reduction and when is it used?
What is the solvency test for a capital reduction?
How does an off-market share buy-back work?
Corporations Act compliant
Tax-effective structure
Managed from resolution to completion
Structure your return of capital correctly before the distribution is made.
Now you understand the essentials. Let us show you exactly how we help families like yours secure their legacy.
An incorrectly structured capital return becomes a tax problem for every shareholder.
Capital reductions and share buy-backs are not straightforward distributions. They require specific corporate approvals, compliance with the Corporations Act’s solvency and shareholder fairness requirements, and careful structuring to ensure the amounts paid are characterised correctly for tax purposes.
Getting this wrong can result in an unfranked deemed dividend for shareholders or a transaction that is voidable under the Corporations Act 2001 (Cth).
- We will advise on the appropriate mechanism - equal reduction, selective reduction, or share buy-back - for your circumstances.
- We will prepare all required Board and shareholder resolutions.
- We will manage ASIC notification requirements and any required shareholder approval process.
- We will coordinate with your accountant to ensure the transaction is structured correctly for tax purposes.
- We will prepare the documents required to execute the distribution.
When the company has capital to return and needs to do it correctly
The company has accumulated capital that is no longer needed in the business, perhaps from a sale of assets, a reduction in working capital requirements, or a decision to wind back the enterprise.
The shareholders want to receive that value, and the Board needs to manage the distribution in a way that complies with the Corporations Act, satisfies the solvency test, and achieves the most tax-effective outcome for shareholders. You need advice on the right mechanism and someone to manage the process.
What's included in your return of capital service
- Mechanism advice and selection.
- Board and shareholder resolution preparation.
- ASIC notification management.
- Tax characterisation coordination.
- Execution documents.
A return of capital that is not properly structured creates a tax problem for shareholders.
Capital reductions that are not correctly documented and structured can be characterised by the ATO as dividends rather than returns of capital – with very different tax consequences for shareholders. A dividend is assessable income, potentially unfranked, and taxed at the shareholder’s marginal rate. A return of capital reduces the shareholder’s cost base in the shares and is generally not assessable until the shares are sold.
The difference in tax outcome can be substantial, and the characterisation depends entirely on how the transaction is documented and executed. Getting this wrong does not create a problem for the company – it creates a problem for every shareholder who received the distribution.
From an unstructured distribution to a correctly executed return of capital
We advise on the appropriate mechanism for your circumstances, prepare the required corporate resolutions and documentation, and coordinate with your accountant to ensure the distribution is characterised correctly for tax purposes. The Corporations Act process (board approval, solvency test, shareholder approval where required, and ASIC notification) is managed from beginning to end. When it is complete, shareholders have received their distribution correctly, the tax treatment is clear, and the corporate record is in order.
From the decision to return capital to a correctly executed distribution.
Mechanism advice
We advise on the most appropriate mechanism for your circumstances - equal reduction, selective reduction, or on-market or off-market buy-back.
Process and documentation
We prepare Board and shareholder resolutions, manage ASIC notifications, and coordinate with your accountant on the tax structure.
Execution
We manage execution of the distribution documents and ensure the transaction is correctly recorded in the company's register.
Corporate lawyers with extensive experience in capital returns, reductions, and share buy-backs.
We understand that distributing capital from a company feels like it should be a simple transaction, but the legal and tax mechanics make it more complex than it appears.
Our team has managed capital reductions and buy-backs across a wide range of company sizes and structures, and we know how to structure and execute the transaction so the outcome is correct for both the company and its shareholders.
We understand you want to know the cost, before we get started.
We will map out our process, from beginning to end, so you know what the journey will look like before you get started.
We will provide you with a clear and detailed Work Proposal covering each step along the way.
Our fair fees are all-inclusive. No hidden costs for telephone calls, emails, photocopying, couriers, or coffee.
Our great lawyer guarantee
We want to be part of your team over the long term. We achieve this by adhering to these core principles:
Take the time
We listen carefully to understand what you want to achieve. Then we thoroughly explain our advice and step you through the documents. You can be sure you know the full consequences.
Share our knowledge
We will pass on as much knowledge as we can, so you can make your own informed decisions. We want to make you truly independent.
Stick to our knitting
We only do what we're good at. You can be confident that we know what we're doing and don't pass on the cost of our learning.
Work as one team
Someone will always be available to answer your questions, or point you in the right direction. You will also benefit from a range of perspectives and experience.
Fair pricing
For advice and documents, we provide a fixed or capped quote so you don't take price risk. If you're in a dispute, we map out the process and costs so you know what to expect.
It's your show
We're not in this for our egos. We're in it for a front row seat to witness your success.
