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The Summary Approval Procedure – A Tax Planning Asset

Welcome to Query Of The Week

A client recently contacted us because they had run into a Company Law roadblock. They had a principal shareholder who wanted to retire from the company but they didn’t have sufficient Profit & Loss Reserves to undertake a Redemption and Buyback of Shares.

John dug a bit deeper and came up with a solution that kept everyone happy…..

Five Summary Approval Procedures – Practical Use for Restructuring/Tax Planning

If this Query Of The Week was of interest to you, you will also be interested in our Five Summary Approval Procedures – Practical Use for Restructuring/Tax Planning online course.

Full details for this online course can be found here.



CPD Allocation 1 Hour
Fee €25 (or 1 CPD Club point)
Presenter John Murphy – OmniPro
Category Taxation


Query Of The Week – Video Transcript

(Please note that this is a direct unedited transcript of the spoken word as recorded on the video) 

Hello and welcome to this week’s query of the week. So this week a client came to us, they provided their balance sheets and their financial statements. The idea was the principal shareholder wanted to retire from the company, just leave the company in full. And so they came to us and said we’re hoping to do a share buyback but looks like we’re limited because of company law.

When I looked at the financial statements and I could see that their profits and loss reserves weren’t sufficient to allow for the buyback or the redemption of the shares which was preventing it. He would have met all the other conditions in the tax act, in sections 176 to 186 in relation to the CGT treatment and share buyback so the profits and loss reserves was the only thing that was preventing it.

I then looked at the owner’s shared capital and share premium and I noticed that in the past, a share for undertaking had been carried out where it was a large share premium and owner shared capital. So, as a result, I advised him of Summary Approval Procedure under SAP 204 Section 204.

Effective what The Companies Act and section 204 allows you to do is to reduce your share capital because ordinarily under company law and section 84 prevents you from reducing your share capital unless you go down the rout of a Summary Approval Procedure under SAP 204.

So I advised him that if they were to undertake a Summary Approval Procedure under Section 204 they could reduce the owners Share Capital and Share Premium. You can dictate how much you’re going to reduce it down by and Section 117 of the Companies Act makes it clear that when you reduce your share capital and through that process a distributed reserve is created that then allows you to have the distributed reserves to do a Buyback of Shares.

As we all know you can only do a buyback of shares where you already have distributed reserves to do it or where it’s from, a fresh issue of shares and proceeds from a fresh issue of shares.

So, in that particular case, the client’s problem was solved and created distributed reserves to allow for the share buyback to happen. So, that in itself shows how Summary Approval Procedures can help in tax planning or, succession planning. These are key tools that can be used very well if you know about them.

I hope you found this enquiry useful. We’re having a seminar Wednesday on the 6th of February dealing with summary approval procedures and how they can actually help or work towards some tax planning or corporate structure or succession planning in that regard like such as you know you have a summary approval procedure under a SAP 203 where that’s for financial assistance for parts of owned shares, you might need that you know at certain times when you’re buying shares.

Director’s loans is another one. So the SAP 204 we talked about reducing your share capital, sometimes you might want to do a transfer of an undertaking. You might have to do a summary approval procedure and a SAP 204 again to permit it under company law. Likewise, if you’re mergers, you’ve got your SAP process as well which will allow you to carry out these transactions. Summary approval procedures, they should be a key tool in your toolbox when you’re trying to carry out these types of transactions on a day to day basis.