Company share buyback limit increased to 20%

SINGAPORE - Changes have been made to the Companies Act to allow Singapore firms greater flexibility in the buying back of its shares, the Ministry of Finance (MOF) said on Monday.

From October 1, the limit on the total number of a company's issued ordinary or preference shares that a company may buy back under the Companies Act will be raised from 10 per cent to 20 per cent.

MOF said in a statement that the move towards greater flexibility takes reference from the company law in other countries such as the United States, Canada, United Kingdom and Hong Kong, which do not impose share buyback limits.

Companies must conduct their share buyback in accordance with the requirements in the Companies Act, which is designed to safeguard the interests of shareholders and creditors, MOF added. These include the need to obtain shareholders' approval, meet solvency test, and provide adequate disclosure to shareholders.

While the new 20 per cent limit applies to all companies incorporated in Singapore, SGX-listed companies will continue to be subject to the existing 10 per cent limit, which is now stipulated in SGX's listing rules. This approach is consistent with the practices in other jurisdictions where listed companies are subject to a tighter share buyback limit imposed by exchanges through their listing rules, instead of through the company law.

As part of the ongoing review of the Companies Act, MOF will be seeking public feedback on additional proposals relating to the share buyback regime in the coming weeks.