The company yesterday launched an effort to buy back about 23.3 million shares and options for another 5.6 million shares. The firm said when it issued these options and shares it did not register them, which may be illegal.

Certain shares of common stock issued… were not registered under federal securities laws and we did not seek to exempt these securities from the registration requirements of these laws, the firm said in a Securities and Exchange Commission filing.

Technically referred to as a rescission offer, the buyback appears to be an effort to limit Google’s potential liability for the possible violation of the Securities Act of 1993 and the securities laws of 18 states and the District of Columbia.

It is unclear whether the rescission offer will terminate our liability, if any, Google’s SEC filing says. It’s not currently clear who, if anybody, would want to sue. The affected shareholders stand to make a lot of money.

The 23,240,668 shares were issued to 1,105 employees and contractors between September 2001 and June 2004. Options for another 5,592,248 shares were given to another 301 employees. Buying them all back would cost up to $25.9m.

A Google spokesperson said that the filing was not unanticipated, and that it had first been disclosed months ago in the firm’s first SEC filing. He said Google does not expect enough people to participate to have a material effect on the company.

Google said it will buy back the shares for their purchase price plus interest of 7% per year. The options will be bought for 20% of their exercise price plus 7% interest. But there will certainly be reluctance from many holders to sell.

The shares were sold for between $0.30 and $80 each, with an average price of $2.86. Google expects its IPO pricing to be between $108 and $135 per share, so the incentive to sell back for a 7% gain would be unattractive to anyone who believes Google stock will be anything other than a complete failure.

Google said that an officer of the company, which it did not name, will not be selling his or her 52,783 shares, and that a 5% shareholder, also not named, will not be selling his 1,046,834 shares under the rescission offer.

According to Google’s filing, people who do not accept the offer will actually be able to sell their shares after Google goes public. The search firm’s long-awaited initial public offering is expected to be executed soon.