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Stock Cancellation Agreement

Stock Cancellation Agreement Template for England and Wales

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Key Requirements PROMPT example:

Stock Cancellation Agreement

"I need a Stock Cancellation Agreement to cancel 10,000 ordinary shares held by a departing senior executive, with completion scheduled for March 15, 2025, including standard non-compete provisions and payment terms for agreed consideration of £50,000."

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Document background
A Stock Cancellation Agreement is typically used when a company needs to reduce its share capital or when implementing employee exit arrangements. This document, governed by English and Welsh law, outlines the specific shares to be cancelled, any consideration payable, and the process for effecting the cancellation. It ensures compliance with the Companies Act 2006 and includes necessary representations and warranties from both the company and the shareholder. The agreement is particularly important for maintaining clear records of share capital changes and protecting all parties' interests in the transaction.
Suggested Sections

1. Parties: Identification of the company and shareholder(s) whose shares are being cancelled

2. Background: Context of the cancellation, current shareholding details, and reference to relevant board/shareholder approvals

3. Definitions: Key terms used throughout the agreement including Share Capital, Completion Date, and Consideration

4. Cancellation Terms: Details of shares being cancelled, effective date, and any consideration

5. Representations and Warranties: Confirmations regarding share ownership, authority to cancel, and compliance with laws

6. Completion Obligations: Actions required by each party to effect the cancellation including document delivery and registrations

Optional Sections

1. Payment Terms: Details of consideration payment including amount, timing and method (if shares are not being cancelled for nil consideration)

2. Tax Indemnities: Provisions dealing with tax implications of the cancellation and related indemnities

3. Confidentiality: Provisions regarding confidentiality of the transaction and its terms

Suggested Schedules

1. Schedule 1 - Share Details: Detailed description of shares being cancelled including class, nominal value, and share certificate numbers

2. Schedule 2 - Board Resolutions: Copy of board resolutions approving the share cancellation

3. Schedule 3 - Shareholder Resolutions: Copy of any required shareholder resolutions approving the cancellation

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok³ÉÈË°æ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

alex.den.21@genieai.co
Relevant legal definitions
































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Industries

Companies Act 2006: Primary legislation governing share capital reduction, share buybacks (Parts 17-24, Sections 658-659 on buybacks, Sections 641-653 on capital reduction)

Financial Services and Markets Act 2000: Legislation covering regulated activities and financial promotions related to share transactions

UK Listing Rules: Regulatory framework applicable to publicly listed companies regarding share cancellations

Market Abuse Regulation (MAR): Regulatory framework preventing market abuse and ensuring fair trading in shares

FCA Disclosure Guidance and Transparency Rules: Regulatory requirements for disclosure and transparency in share-related transactions

Income Tax Act 2007: Tax legislation relevant to the treatment of share cancellations for individual shareholders

Corporation Tax Act 2010: Tax legislation governing corporate tax implications of share cancellations

Taxation of Chargeable Gains Act 1992: Tax legislation covering capital gains implications of share cancellations

Articles of Association: Company's constitutional document containing rules about share rights and capital alterations

Shareholders' Agreements: Private agreements between shareholders that may contain provisions affecting share cancellations

Corporate Governance Codes: Best practice guidelines for corporate governance in share-related matters

Insolvency Act 1986: Legislation containing capital maintenance rules and solvency considerations for share cancellations

Common Law Principles: Case law and legal principles established by courts regarding share rights and obligations

Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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