Return on equity meaning

Tax consequences of different buyback structures The table below offers a concise overview of the tax outcomes arising from the various forms of share buyback that a UK company may undertake. Throughout, it is assumed that the relevant shareholder is UK resident and that the repurchased shares are held as an investment. For fuller guidance on the tax treatment of share buybacks, see the following Practice Notes: Tax consequences of share buybacks—main rules Tax consequences of share buybacks—calculating the income capital split Tax consequences of share buybacks—unquoted trading companies For a comparative table setting out other ways a company can return value to shareholders, together with the principal UK tax issues for each route, see: Key UK tax considerations for returning value to shareholders—comparative table. Note that tailored provisions apply where the company repurchasing its shares is a qualifying asset holding company. For more on this, refer to Practice Note: Qualifying asset holding companies (QAHCs)—tax treatment...

Other developments Here is a round-up of further developments not explored in full by the Lexis+ Financial Services practical guidance team but which may still be of interest: CP25/31: The framework for a UK equity consolidated tape [Update] Note on the Construction of CP25/31 Cost Benefit Analysis (CBA) Minutes of the UK Money Markets Code Sub-Committee – December 2025 CCR009 return – relevant ancillary credit firm [Update] Report on Marketing requirements and marketing communications under the regulation on cross-border distribution of funds ESAs’ Joint Board of Appeal rules on reimbursement of costs in an appeal brought by NOVIS Insurance Company against the European Insurance and Occupational Pensions Authority (EIOPA) ...

In this issue: Corporate governance Tax treatment HMRC Manuals tracker Dates for your diary Weekly highlights from other practice areas Corporate governance Babcock suffers investor dissent over executive pay FTSE 100–listed Babcock International Group PLC faced significant shareholder resistance to its executive remuneration at this week’s general meeting. Over 32% of votes went against the Directors’ Remuneration Policy, and more than 32% also opposed amendments to the performance share plan (PSP), though in each instance a majority of those voting backed the resolutions. Under the plans, the PSP—which delivers annual equity awards that vest after three years based on a scorecard of performance targets—would gain an additional absolute Total Shareholder Return (TSR) ‘kicker’ for awards granted from the 2026 financial year. Consequently, once the existing ‘core’ scorecard has determined vesting of the current ‘core’ opportunities (set at 250% and 200% of salary for the CEO and CFO, respectively), a further multiplier, linked to the company’s absolute TSR,...

Judge James Picken, sitting in the High Court, determined that VietJet Aviation Joint Stock Company had entered into a leasing arrangement with FW Aviation (Holdings) 1 Ltd, a FitzWalter Capital unit, for four Airbus aircraft worth US$111m, and did so 'with full knowledge of the nature and terms' of the transaction. He stated that for the structure, a Japanese operating lease with call option, to be workable, the carrier had to make rental payments on time. The airline is 'a sophisticated commercial actor with significant experience in aircraft financing', and it appreciates the rationale for these types of structures, Picken said. He went on to explain that early termination is 'very damaging' to the economic benefits expected by Japanese investors, therefore the termination clause provides for 'a sum compensating those investors for the reduced tax benefit and also a sum to reflect the expected return on the equity investment for the investors'. Judge Picken added that he had applied the legal test from the landmark UK Supreme Court decision in...

Introduction to margin loans What is a margin loan? At a high level, a margin loan is credit extended to a borrower, secured by liquid assets pledged for the lender’s benefit. The collateral usually consists of instruments traded on public markets or exchanges, most commonly the borrower’s listed shares, which serve as the underlying assets. The outstanding balance under the margin loan facility is compared with the value of those assets through a loan to value test. Should the collateral’s value drop beneath an agreed threshold, a margin call arises, obliging the borrower to act—typically by adding cash or further security—to return the loan to value ratio to the agreed level. Because asset values are set by exchange-traded prices, the loan to value can fluctuate rapidly and is therefore usually checked daily at the close of trading on the relevant exchange, when prices are settled. This Practice Notice concentrates on margin loans secured over listed shares, though margin loans may alternatively be secured over other asset classes...

Venture capital is a form of private equity finance supplied to early-stage, start-up companies with limited or no trading history, aimed at backing businesses at the outset. Background to venture capital investment The combination of a short operating track record and, in many instances, an unproven business model underpinned by untested technology means committing funds to these companies is a high-risk strategy. Investors who focus on such ventures will typically contribute technical capability as well as managerial expertise to the management team, but, given the risk profile, they will also seek high rates of return on the capital they deploy. Why seek investment? Businesses that pursue venture capital are generally too small to raise capital in the public markets and are unable to secure debt finance, so equity investment becomes the viable route to funding growth. Types of investment and investors There are distinct phases of venture capital investment, largely determined by the stage of the investee company’s development and the size of funding...

A private equity fund is a collective investment arrangement. Created and overseen by private equity firms, these vehicles channel committed capital into privately owned companies—whose securities are not traded on public markets—by purchasing existing issued securities or subscribing for newly issued securities... Private equity firms What is a private equity firm? In essence, a private equity firm is a team of investment professionals that deploys and oversees money provided by external investors through funds the firm establishes for private equity transactions... Independent: Typically founded and owned by senior members of the firm, they manage multiple funds and raise capital from varied sources, including insurance companies, pension schemes and high net worth individuals... Captive: Usually housed within large institutions such as banks, insurers and pension funds, they invest capital supplied by the parent institution and may, at times, be allowed to secure funding from third parties... What is a private equity investment?

Articles of Association for [ insert name of company ] Limited (Incorporated in England and Wales under registration number [ insert number ]) (Adopted by a Special Resolution passed on [ insert date ] 20[ insert year ]) 1 Model Articles 1.1 The Model Articles apply to the Company except to the extent that these Articles alter, disapply or conflict with them; subject to any such amendments, exclusions or inconsistencies, the Model Articles shall, together with these Articles, comprise the Company’s articles of association, replacing any other articles or regulations contained in any statute, statutory instrument or other subordinate legislation. 1.2 The whole of Model Articles 11(2) (quorum for directors’ meetings), 12 (chairing of directors’ meetings), 13 (casting vote), 14(1)-(5) (conflicts of interest), 21 (all shares to be fully paid up), 26(5) (share transfers), 30(5)-(7) (procedure for declaring dividends), 39 (chairing general meetings), 42 (voting: general), 44(2) (poll votes), 50 (no right to inspect accounts and other records), 51 (provision for employees on...

Companies Act 2006: Private Company Limited by Shares — Articles of Association of [ insert name of company ] Limited (Incorporated in England and Wales under registered no. [ insert number ]) (Adopted by special resolution passed on [ insert date ] 20[ insert year ]) 1 Model Articles 1.1 The Company adopts the Model Articles except to the extent that these Articles amend, disapply or conflict with them. Subject to any such amendments, exclusions or inconsistencies, the Model Articles together with these Articles comprise the Company’s articles of association, to the exclusion of any other articles or regulations contained in any Act, statutory instrument or other subordinate legislation. 1.2 The entirety of the following Model Articles shall not apply to the Company: 11(2) (quorum for directors’ meetings) 12 (chairing of directors’ meetings) 13 (casting vote) 14(1)–(5) (conflicts of interest) 21 (all shares to be fully paid up) 26(5) (share transfers) 30(5)–(7) (procedure for declaring dividends) ...

Companies Act 2006 — Private Company Limited by Shares — Articles of Association for [ insert name of company ] Limited (Incorporated in England and Wales under registered no. [ insert number ]) (Adopted by special resolution passed on [ insert date ] 20[ insert year ]) 1 Model Articles 1.1 The Model Articles will govern the Company save where these Articles alter, disapply or conflict with them; subject to any such variations, exclusions or inconsistencies, the Model Articles together with these Articles form the Company’s articles of association, to the exclusion of any other articles or regulations contained in any statute, statutory instrument or other subordinate legislation... 1.2 The following provisions of the Model Articles shall not apply to the Company: 11(2) (quorum for directors’ meetings), 12 (chairing of directors’ meetings), 13 (casting vote), 14(1)–(5) (conflicts of interest), 21 (all shares to be fully paid up), 26(5) (share transfers), 30(5)–(7) (procedure for declaring dividends), 39 (chairing general meetings), 42 (voting: general), 44(2) (poll votes), 50 (no...