ArticlesAcquiring warrants from the SA

November 14, 2022by Stavros Koumentakis

Warrants are an excellent tool for attracting investors and capital to an SA. We approached, among other things, in the context of our related article, issues regarding the issuance of the warrants and the relationship between the issuing SA and their third-party holder. In the direction of the further investigation of this specific institution, we will be concerned, here, with an interesting question: Is it allowed for an SA to become the beneficiary of its own or its parent company’s warrants? And, if so, under what conditions?


Acquisition of Warrants

The matters related to the original and derivative acquisition of the same warrants are regulated in the law (art. 57 n. 4548/2018) in an application by analogy of the provisions on the, original and derivative, acquisition of own shares by the SA.

For reasons of protection of the shareholders, the SA and the corporate lenders, it is prohibited (art. 57 §1 paragraph a’) to undertake (primary acquisition) of warrants by the same – upon their issuance. In this way, the future increase of the SA’s share capital with its own participation is avoided (after the exercise, that is, of the options included in the warrants). The taking of warrants by a third party (e.g. a member of the Board of Directors or another), who acts in their own name on behalf of the SA, is also, logically, prohibited.

It is also prohibited, according to a logical sequence, the pledging of warrants, to secure claims of the SA that it issued itself (art. 57 §1 paragraph a’).

On the contrary, (art. 57§2) the derivative-secondary acquisition of warrants (e.g. through purchase) by the SA is allowed. The conditions, in this case, are stricter than those concerning the derivative -secondary acquisition of its own shares.

Finally, the SA is allowed to finance third parties to acquire their own warrants (art. 57 §1 sec. b’). After all, the financial support of third parties often serves the purpose of leveraged buy-outs. A necessary condition, however, is compliance with the conditions for the acquisition of own shares by the SA.


In particular: Derivative Acquisition of Warrants

Scope, Risks & Purpose

The acquisition of warrants, in a derivative way, refers to acquisitions (through sale, for example – as already mentioned), carried out by the SA. It also refers to acquisitions, by a third party, who operates in their own name on behalf, however, of the SA (:indirect representative).

The acquisition of warrants by the SA involves risks. The payment of consideration by the company violates the principle of protection of the share capital. Its cash reserves are used, in this case, for prohibited, in principle, purposes: for the acquisition, i.e. of an option to acquire its own shares (which, as such, the SA is forbidden to undertake).

At the same time, in this case, the company’s solvency towards its creditors is reduced. And so is its creditworthiness, the value of the investment for the shareholders and the potential interest of prospective investors.

Despite the obvious risks, however, the acquisition of warrants by the SA is likely to serve its reasonable business and investment interests.

This same acquisition by the SA may, first of all, be the way to avoid the exercise of the option by the transferor-beneficiary of the warrants. In this case, the SA will not be obliged to increase the share capital and issue new shares in the future.

However, there is another, also interesting perspective for the SA: the investment perspective. With the same acquisition of the warrants on its part, it is possible to achieve: (a) More effective utilization of the market conditions for the benefit of the latter (:SA) – as it will then be able to redistribute the warrants at a higher price, in new investors. (b) Diversification of the beneficiaries of the warrants – as long as such a choice serves its strategic goals.

Method of Acquisition

The acquisition by an SA of the warrants issued by itself cannot, of course, take place unilaterally; on the contrary, the cooperation of the respective beneficiary-holder is a prerequisite. The most common way is to sell and transfer them from the latter (their beneficiary) to the SA. A redemption (“withdrawal”) clause of the warrant purchase agreements in international trading practice, is not, however, rare. Such a clause is placed in the issue contract of the specific warrants and makes them redeemable by the issuer. In this way, an option is formed (of a speculative-profit nature) in favor of the SA. Its exercise is subject to predetermined conditions regarding, in particular, the time of exercise as well as the price of the acquisition.


Derivative Acquisition Conditions

Cases of transactions involving the derivative acquisition of warrants for consideration (e.g. through sale) are permitted, but stricter prerequisites are provided (compared to those for the acquisition of own shares). And this is because, although it is possible for the proprietary warrants to present an investment interest, the exercise by the company of the options embedded in its own or its parent’s warrants is prohibited (art. 58 § 1 section b’).


The SA’s decision on the acquisition of warrants it issued itself belongs to its Board of Directors – as a collective body. The relevant approval is provided prior to the acquisition and has a specific duration of validity. The authorization of a substitute body is expressly prohibited (art. 57 §2 section a’).

In its relevant decision, the Board of Directors should justify and link the specific acquisition to the service of the corporate interest (art. 57 §2 paragraphs a’ and b’). In the same decision, the minimum and maximum limits of the acquisition value should also be determined, as they result from the mandatory report of a chartered accountant or accounting firm (art. 57 §3 para. a). The onerous acquisition may not result in the reduction of equity to an amount lower than that prescribed by law (art. 57 §3 para. b and 159§1).

In the event that there are exceptional financial reasons, the decision to acquire the same shares should be taken by the ordinary GA of the SA.

The questions regarding the responsibility of the members of the Board of Directors are determined by the rules of diligent management (art. 96 et seq.). Their criminal liability is also not excluded (art. 177 par. 3).

More Special Terms

The issuer’s contract with the holder of the warrants (and/or special legislative regulations) may further limit the acquisition of the same warrants. In any case, however, the SA, both during the process of purchase and redemption-withdrawal of the warrants, must observe the principle of equal treatment of their holders (art. 57 § 2 section a’). If the warrants are traded on a regulated market or MTF, the provisions to avoid market abuse must also be observed.

Universal Transfer of Property Or us a Donation

Contrary to the limitations and conditions mentioned immediately above regarding the acquisition of warrants for a consideration, the acquisition of the same warrants by the SA in the context of a universal transfer of property (e.g. acquisition by absorption) or for a gratuitous reason (e.g. donation) their observance is not required (art. 57§ 2 section c’).


Consequences of Ownership-Liabilities of the SA

The same warrants that the SA acquires, even its own, are assets (: securities) of the company. However, the fate of the warrants that the SA will potentially acquire is, as it appears, predetermined (Art. 57 § 4); it must cancel the specific warrants immediately, since with the same acquisition it sought to repay its obligations as an issuer. However, if the SA became the owner of them without payment of consideration, then it has a window of one month to cancel the warrants or reallocate them.

Companies with listed warrants must inform the investing public about any own acquisition.

Acquisition of own warrants in violation of the above creates an obligation to transfer them within one year, otherwise the warrants are canceled (art. 57 §5).


We have already established, in the context of our previous article, that the acquisition of warrants is an excellent investment tool. Their utilization, however, requires special attention. Their acquisition, e.g., by the SA that issued them is prohibited to take place at the time of their issuance. On the other hand, and under strict conditions, it is possible for the issuing SA to acquire them at a time subsequent to their issue – by purchasing them, e.g., from their owner. The purposes and interests of the SA that can be served in this case are not negligible! In any case: in order to complete our view of the warrants, we should also approach the way of exercising the option embodied in them to increase the SA’s share capital. About this, however, see in our next article. –

Stavros Koumentakis
Managing Partner


P.S. A brief version of this article has been published in MAKEDONIA Newspaper (November 13th, 2022).


Disclaimer: the information provided in this article is not (and is not intended to) constitute legal advice. Legal advice can only be offered by a competent attorney and after the latter takes into consideration all the relevant to your case data that you will provide them with. See here for more details.

Stavros Koumentakis
Nikis Avenue & 1, Morgenthau st., 54622 Thessaloniki
(+30) 2310 27 80 84

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