Also known as: repurchases · repurchased · repurchasing · repo
Written by attorneys · grounded in primary & secondary sources — see below
The act of buying back property, securities, or an interest previously sold or issued. In property settings a reserved option to repurchase is an interest left in the conveyor that is subject to the rule against perpetuities under the exception stated in Restatement (First) of Property § 394.
After conveying Blackacre to a developer, the original owner reserves an option to repurchase the parcel if the developer fails to begin construction within five years. Because the interest is a reserved option to repurchase, the option is tested under the rule against perpetuities. The developer later defaults on the timeline, and the original owner exercises the option subject to that review.
A city redevelopment agency acquires several blighted parcels through eminent domain. The plan permits former owners to repurchase their lots once the agency completes site assembly and issues new building permits. One former owner exercises the right, pays the redevelopment price, and obtains title.
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NCS directors approve a stock repurchase program to support the trading price after a potential acquirer emerges. The program is conditioned on Genesis completing its merger. The board views the repurchase as part of the deal-protection package. Shareholders later challenge the arrangement.
MITE launches a tender offer for a target corporation. The target responds by announcing a repurchase of its own shares to increase insider ownership and raise the cost of the bid. The repurchase is disclosed as one of several defensive steps available under state law.
A car rental agency sells vehicles to a dealership under an agreement that contains no mileage cap on the repurchase obligation. Course-of-dealing evidence shows the dealer previously refused to repurchase cars driven more than 9,000 miles. The dealer now refuses to take back high-mileage vehicles, and the rental agency sues for breach.
A trust company purchases bonds issued by a state to finance public improvements. The bonds contain a repurchase feature allowing the issuer to buy them back at par after a stated period. The trust company later seeks to enforce the repurchase right against the issuer.
Issued shares remain outstanding until the corporation completes a valid reacquisition, redemption, conversion, or cancellation. An oral statement that shares automatically revert, without board action, payment, or ledger entries, leaves the shares outstanding and preserves the holders' rights.
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Directors who vote for or assent to a distribution exceeding statutory limits may be personally liable to the corporation if they failed to exercise the care of a reasonably prudent person in like circumstances. Reliance on an incomplete balance sheet that omits known liabilities can constitute a breach of that standard.
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When shares have been issued, the board must first adopt the proposed amendment to the articles. Shareholder consent alone cannot cure the absence of prior board action, so an amendment circulated directly to shareholders without board approval is invalid.
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A shareholder agreement is effective against the corporation and all shareholders, including later purchasers who receive notice, provided it meets the formal requirements of unanimous written consent at the time of adoption and conspicuous notation on certificates. Amendment generally requires unanimous consent of then-current shareholders unless the agreement provides otherwise.
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…we have said also disposes of any contention concerning the fact that certain property owners in the area may be permitted to repurchase their properties for redevelopment in harmony with the over-all plan. That, too, is a legitimate means which Congress and its agencies may adopt, if they choose. In the present case,…