Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

B share scheme definition

What does B share scheme mean? A B share scheme is a corporate method used to return surplus cash to shareholders by creating and issuing a new class of shares (B shares) pro rata to existing holdings (often by way of a bonus issue), followed by either paying a dividend on the B shares, redeeming or buying back the B shares for cash, or cancelling them through a reduction of capital. The term is not defined in legislation; it is a market shorthand used in UK and Irish practice. Key features include flexibility over tax treatment: depending on the route chosen, shareholders may obtain income...

Returning capital via B and B/C share schemes in the UK: structures, financing, tax after FA 2015, and listed/AIM compliance

Published by a LexisNexis Corporate expert

Practice notes

A B share scheme

A B share scheme returns surplus capital to a company’s shareholders by creating B Shares (so named to set them apart from Ordinary Shares), followed by either paying a dividend on those shares or effecting their Redemption, buy back or cancellation. This approach was most frequently adopted by listed companies in the past, albeit not exclusively. It is now rarely used to distribute excess capital, as it no longer delivers the tax advantages it once did (see History of the B share scheme below).

Companies can return excess capital without using a B share scheme via:

a routine dividend payment
a ‘special’ dividend (a one-off, usually large interim dividend, paid outside a company’s routine dividend programme)
a share buyback
a reduction of capital
a scheme of arrangement

For further details about these alternative methods of returning excess capital to shareholders, see Practice Notes: Dividends—the legal framework, How to carry out a share buyback, How to carry out a reduction of...

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Web page updated on 21/05/2026

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