Section 705 | Payments apart from purchase price to be made out of distributable profits

(1)A payment made by a company in consideration of—

(a)acquiring any right with respect to the purchase of its own shares in pursuance of a contingent purchase contract approved under section 694 (authorisation of off-market purchase),

(b)the variation of any contract approved under that section, or

(c)the release of any of the company's obligations with respect to the purchase of any of its own shares under a contract—

(i)approved under section 694, or

(ii)authorised under section 701 (authorisation of market purchase),

must be made out of the company's distributable profits.

(2)If this requirement is not met in relation to a contract, then—

(a)in a case within subsection (1)(a), no purchase by the company of its own shares in pursuance of that contract may be made under this Chapter;

(b)in a case within subsection (1)(b), no such purchase following the variation may be made under this Chapter;

(c)in a case within subsection (1)(c), the purported release is void.