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The other route

MBO by company buyback: the CTA 2010 and Companies Act rules

Updated

Instead of a new company buying the shares, the company can buy back the seller's shares itself.

Talk to a specialist The price, the EBITDA and how much the team and the seller put in.

Default: the £5m deal in Clifton Private Finance's worked MBO example, where £500,000 of management equity is 10% of the deal.

Senior lenders size their loan on this figure. YFM Equity Partners asks for at least £1m of profits for an MBO.

Spark Finance: senior debt is typically provided at 3 to 4 times EBITDA. Use your lender's figure.

Harper James: on an MBO as much as 50% of the price may be deferred and paid over 3 to 4 years. Clifton's example defers £1m of £5m, 20%.

Spark Finance: typically 10 to 30% of the purchase price. Clifton's example is 10%.

Funding gap still to fill

£500,000

What equity, vendor deferral and senior debt at your multiple leave unfunded: the slice a mezzanine lender, an investor or a larger deferral has to cover.

Management equity£500,000
Vendor loan (deferred consideration)£1,000,000
Senior debt the EBITDA supports£3,000,000
Senior debt in the stack£3,000,000
Senior debt as a multiple of EBITDA3
Stamp Duty on a share purchase (0.5%, rounded up to £5)£25,000

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Share purchase or asset purchase?

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  • Read and answered by Joe himself, never passed to a firm or a list
  • Information only: no tax, legal or investment advice
How this calculator works
  • Senior debt. Spark Finance: the management team contributes equity, typically 10 to 30% of the purchase price, and senior debt is typically provided at 3 to 4 times EBITDA by specialist acquisition lenders. The calculator takes the smaller of your multiple x EBITDA and what the price still needs. (Spark Finance: how to fund a management buyout in the UK)
  • Vendor deferral. Harper James: on an MBO as much as 50% of the purchase price may be deferred and paid out over 3 to 4 years. The calculator treats your percentage as deferred consideration owed to the seller. (Harper James: vendor deferred loans)
  • Stamp Duty. A share purchase pays Stamp Duty at 0.5% on a transfer over £1,000, rounded up to the nearest £5, paid within 30 days of the stock transfer form being signed and dated (GOV.UK, tax when you buy shares, and Stamp Duty on shares). An asset purchase pays no Stamp Duty on shares; any property in it is a separate SDLT question the calculator does not answer. (GOV.UK: Stamp Duty on shares)
  • No lender's terms. The calculator shows the shape of the funding stack, not an offer: a lender sets its own multiple, security, rate, term and covenants. No interest, fees or deal costs are added.
  • The seller's side. If the seller qualifies for Business Asset Disposal Relief, GOV.UK charges 18% on qualifying gains disposed of from 6 April 2026; a buyback by the company itself has its own conditions under CTA 2010, set out on this site. (GOV.UK: Business Asset Disposal Relief, eligibility)

Capital treatment

  • The company must be an unquoted trading company and the buyback for the benefit of its trade.
  • The seller must normally have owned the shares for five years or more.
  • The seller's interest must fall to no more than 75% of what it was, and the seller may not be connected with the company (more than 30%) afterwards.

Source: GOV.UK: seeking clearance or approval for a transaction

Filings

  • A return of the payment to HMRC within 60 days (CTA 2010 s1046).
  • A return to Companies House within 28 days (Companies Act 2006 Part 18).

Source: CTA 2010 section 1046: return of payments

A private company may also buy back up to the lower of £15,000 or 5% of its share capital in a year out of cash without distributable reserves, if its articles allow.

Source: Companies Act 2006 Part 18 Chapter 4: purchase of own shares

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Share purchase or asset purchase?

Tick the box above to send your enquiry.

  • Free, and no obligation
  • Read and answered by Joe himself, never passed to a firm or a list
  • Information only: no tax, legal or investment advice

Sources

This site's own datasets, every figure quoted from its source and dated:

  • The Mbo Funding Terms carries 5 published figures read from 5 sources' own pages, from 25,000 to 3,000,000 GBP, read 28 October 2026.
  • The Mbo Tax and Company Law carries 5 published figures read from 3 sources' own pages, from 5 to 75 percent, read 28 October 2026.
  1. GOV.UK: tax when you buy shares
  2. Spark Finance: how to fund a management buyout in the UK
  3. Harper James: vendor deferred loans
  4. Clifton Private Finance: the management buyout process, worked example
  5. Shawbrook: management buy-outs
  6. GOV.UK: Business Asset Disposal Relief, eligibility
  7. GOV.UK: Stamp Duty on shares
  8. GOV.UK: seeking clearance or approval for a transaction
  9. CTA 2010 section 1046: return of payments
  10. Companies Act 2006 Part 18 Chapter 4: purchase of own shares
  11. TCGA 1992 section 236H: disposals to an employee-ownership trust

Work out your MBO funding stack

The price, the EBITDA and how much the team and the seller put in.

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