Open Access

Johannes Stawowy

• For the German observer the idea of a Company repurchasing its own shares seems to resemble the picture of a snake eating its own tail. It appears to be highly unnatura1 and one wonders how the tail tan possibly be eatable for the snake. Not in the United States. Although repurchases have once been subject to the most stubbornly fought conflict in US Company law only some modest disclosure requirements and safeguards against overt market manipulation exist today. Large repurchases are an almost everyday event and there is an increasing tendency. The aggregate value of shares repurchased by NYSE listed companies has increased from $ 1 .l billion in 1975 to $ 6.3 billion in 1982 to $ 37.1 billion in 1985*. Few examples may illustrate this practice further: Within three years Ford Motor Corp. repurchased 30 million shares for $ 1.2 billion. In 1985 Phillips Petroleum Corp. was faced with two hostile bids and took several defensive Steps, one of which was to tender for 20 million of its own shares at a total tost of $ 1 billion. And by the end of 1988 Exxon Corp. retired 28 percent of its shares that had once been outstanding at an aggregate tost of $ 14.5 billion. The Situation in Germany is completely different. As it will be shown under German law repurchases are severely restricted and do appreciable amount at all. not take place at an In contrast to German law the United Kingdom does not prohibit repurchases but requires companies to comply with such complex rules that US companies would regard simply as limiting their economic freedom. Therefore UK companies very seldom repurchase their own shares, too. This Paper deals with repurchases by quoted companies, in particular the UK public Company and the more or less German equivalent, the Aktiengesellschaft (AG). It seeks to ascertain the reasons why companies might want to engage in those activities. Moreover, it tries to analyse the Problems which may arise from repurchases and the safeguards which the UK and German legal Systems provide for these Problems.This Paper deals with repurchases by quoted companies, in particular the UK public Company and the more or less German equivalent, the Aktiengesellschaft (AG). It seeks to ascertain the reasons why companies might want to engage in those activities. Moreover, it tries to analyse the Problems which may arise from repurchases and the safeguards which the UK and German legal Systems provide for these Problems.