7
12.
It is not suggested that all the above advantages are necessarily
desirable; (j) in particular may be regarded as objectionable as leading
to market-rigging and (k), trafficking in its own shares, is not self-
But some evidently a desirable corporate activity.
particularly (b),
(c) and (a) clearly are valuable, especially in the case of closely-held
companies and it is in relation to such companies that the power is
mainly used in the U.S.A. Even in these cases, however, the power is clearly
capable of abuse; for example by enabling the management to maintain its
own control or to gain control and to use the company's money in doing so."
Professor Gower went on to explain why there was a case for consideration,
at least, of an extension of the power of a private company to re-purchase
its own shares. He then continued:
116.
The
The case for an extension in relation to public companies is
of a different character. Advantages (a) to (a) are either of no or of
lesser moment, (e) seems undesirable in the case of listed securities
and (j) and (k) are probably actually or potentially objectionable.
only seemingly unobjectionable advantages appear to be (f) to (i). It is, however, doubtful how far use would be made of (f)(h) or (i). If public
companies want to have shares available for stock options or acquisitions
they seem to experience no difficulty in persuading their members to authorise
the creation of further share capital for this purpose. If they want to
reduce, rather than increase, capital they can do so under a formal
reduction scheme which, in the case of larger companies, is a relatively
simple and inexpensive operation. The argument that, if companies could
spend surplus cash on informal reductions by buying their shares, they
would do so rather than engage in possibly dangerous expansion and
diversification seems distinctly dubious in view of the many surveys
which have concluded that the main motivation of company inanagements is
a desire to expand their empires. It is difficult to see how a power
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