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Singapore – Increase In Share Buyback Limit From 10% to 20% For Companies.

31 October, 2013


Legal News & Analysis – Asia Pacific – Singapore – Corporate/M&A

 

The Ministry of Finance has announced (the “Announcement”) that with effect from 1 October 2013, the limit on the total number of ordinary or preference shares that a Singapore incorporated company may buyback under the Companies Act will be raised from 10% to 20%. This increase does not apply to companies listed on the SGX-ST which remain subject to the existing share buyback limit of 10%.


Background


As a general principle, a company may not buyback its own shares as the purchase of its own shares by a company would amount to a return of capital to its members. This prohibition against share buybacks has been encapsulated in Section 76(1)(b)(i) of the Companies Act, Chapter 50 of Singapore (“Companies Act”).


For commercial expediency, the Companies Act does provide for certain exceptions to the prohibition against share buybacks – such exceptions involve, inter alia, a share buyback in accordance with Section 76B to 76G of the Companies Act.


Increase In Share Buyback Limit


Before the announcement, the amount of shares that may be acquired by a company pursuant to Section 76B to 76G of the Companies Act during consecutive annual general meetings (“relevant period”) was capped at 10% of total number of such class of shares of the Company determined as at (i) the date of the last annual general meeting of the company before the resolution authorizing the share buyback pursuant to Section 76B to 76G or (ii) the date of such resolution, whichever is the higher (unless the company has reduced its share capital during the relevant period).


Following the Announcement, this limit has been raised to 20% for Singapore incorporated companies that are not listed on the SGX-ST. The Ministry of Finance explained that the increase in the share buyback was to accord a company greater flexibility in acquiring its own shares and is consistent with the practice in other jurisdictions. Notwithstanding the increase in the share buyback limit, interests of shareholders and creditors will remain protected as the present regime provides for certain statutory safeguards (in the form of shareholders’ approval, solvency requirements, disclosure requirements, etc. before a company may acquire its own shares).


Conclusion


The Announcement was released on 30 September 2013 and may be retrieved from the Ministry of Finance’s website at www.mof.gov.sg.

 

ATMD Bird & Bird

 

For further information, please contact:

 

Myra Tan, Bird & Bird
myra.tan@twobirds.com

 
ATMD Bird & Bird Corporate/M&A Profile in Singapore

 

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