Share Buyback in Singapore
Here's what about share buybacks in Singapore:
What is a share buyback?
A share buyback, also known as share repurchase, is when a company buys back its own shares from investors. It's a way for companies to return money to shareholders. There are a few reasons why a company might do this:
Having excess capital they can't reinvest profitably.
Increase share value and earnings per share (EPS) for remaining shareholders (since there are fewer shares outstanding): By reducing the number of shares outstanding, EPS naturally goes up, which can make the stock more attractive to investors.
Signal confidence in the company's future to the market: Share buybacks can show investors that the company has strong financials and believes its stock is undervalued.
Alternative to dividends: Buybacks can be a way to return cash to shareholders.
Regulations for share buybacks in Singapore
Singapore has regulations in place for share buybacks. Here are some key points:
Companies can repurchase shares out of their distributable profits or from capital.
There is a limit on the number of shares a company can buy back. It can't exceed 10% of the total issued shares over a period between annual general meetings. [Source: Ministry of Finance - Share Buyback Limit in the Companies Act To Increase]
Cancellation of Shares and Share Buyback
In Singapore, cancellation of shares and share buybacks are connected.
Share Buyback (Repurchase): A company buys back its own outstanding shares. These shares can be either:
Cancelled: This reduces the total number of issued shares for the company. This is the most common approach. Cancellation of Shares and Share Buyback - Accounting and Corporate Regulatory Authority
Held as Treasury Shares: These shares are not cancelled but are instead held by the company itself. There are restrictions on how many shares a company can hold as treasury shares (up to 10% of total issued shares).
Process for Share Buyback
The process for a share buyback will depend on whether the company is listed on the Singapore Exchange (SGX) or not, and how the shares are being purchased. Generally, it involves shareholder approval and filings with the Accounting and Corporate Regulatory Authority (ACRA). Cancellation of Shares and Share Buyback - Accounting and Corporate Regulatory Authority
A company, both listed and non-listed, can undertake a share buyback in any of the following circumstances:
(a) Make an off-market purchase of its own shares after seeking members’ approval during a general meeting.
Members' Special Resolution for Off-Market Share Buyback
In Singapore, a company can buy back its own shares off-market, requiring shareholder approval via a special resolution at a general meeting. Here's a breakdown of the resolution:
Resolution Wording:
"That the Directors be and are hereby authorized to purchase [number] of the Company's issued shares on an off-market basis, at a price of [price per share] per share, subject to the following terms and conditions:
[List of terms and conditions, if any]"
Key Points:
Special Resolution: This resolution requires a majority of more than three-fourths of the votes cast by members entitled to vote on the resolution [Companies Act, Section 184(1)].
Equal Access Scheme: Unlike a selective purchase, this purchase requires offering the same opportunity to all shareholders and doesn't target specific targets.
Notice: The company must provide proper notice to all shareholders about the general meeting and the proposed resolution. The notice should clearly state the intention to propose a special resolution for an off-market share buyback [Companies Act, Section 184].
Additional Considerations:
Market Regulations: Listed companies may need to comply with additional requirements from the Singapore Exchange (SGX) Listing Manual [Clause 948].
(b) Make a selective off-market purchase of its own shares after members pass a special resolution to approve this purchase. Shareholders whose shares are being acquired must abstain from voting.
Members' Special Resolution for Selective Off-Market Share Buyback
Resolution:
"THAT the Directors be and are hereby authorized to enter into an agreement(s) for the selective off-market purchase of the Company's issued shares, subject to the following terms and conditions:
Number of Shares: The Company may purchase a maximum of [number] of its issued ordinary shares.
Purchase Price: The purchase price per share shall be [price per share], subject to [any additional pricing terms, e.g., negotiation with individual shareholders].
Funding Source: The purchase of shares shall be funded from [source of funds, e.g., company's cash reserves].
Expiry: The authority granted to the Directors to enter into such agreement(s) shall expire on [date], which shall not be later than the date of the next annual general meeting.
Disclosure: The Directors shall disclose the details of any agreements entered into and shares purchased pursuant to this resolution within [ timeframe ] after the agreement is signed or the shares are purchased.
AND IT IS FURTHER RESOLVED that no person whose shares are proposed to be purchased or acquired by the Company under this resolution, or any of his/her associated persons, shall be entitled to vote on this resolution."
Key Points:
Special Resolution: This resolution requires a majority of more than three-fourths of the votes cast by members entitled to vote on the resolution [Companies Act, Section 184(1)].
Selective Purchase: Unlike an equal access scheme, this purchase targets specific shareholders and doesn't require offering the same opportunity to all.
Voting Restriction: Shareholders whose shares are being acquired (and their associates) cannot vote on the resolution [Companies Act, Section 76D(3)].
Notice: The company must provide proper notice to all shareholders about the general meeting and the proposed resolution. The notice should clearly state the intention to propose a special resolution for a selective off-market share buyback [Companies Act, Section 184].
Following Steps:
Ensure proper notice is sent to all shareholders about the general meeting and the proposed resolution, specifying the intention for a selective off-market buyback.
At the general meeting, a vote is conducted, requiring a majority of more than two-thirds of the votes cast to pass the special resolution.
(c) Make an acquisition of its own shares under a contingent purchase contract after members pass a special resolution to approve this purchase.
Members' Special Resolution for Contingent Share Acquisition
In Singapore, companies can acquire their own shares under a contingent purchase contract, subject to shareholder approval via a special resolution at a general meeting. Here's a breakdown of the resolution for this scenario:
Resolution Wording:
"That the Directors be and are hereby authorized to enter into a contingent purchase contract for the acquisition of up to [number] of the Company's issued shares, subject to the following terms and conditions:
[List terms and conditions of the contingent purchase contract, including triggers for share purchase]
**AND IT IS FURTHER RESOLVED** that the authority granted to the Directors under this resolution shall expire on [date], which shall not be later than the date of the next annual general meeting."
Key Points:
Special Resolution: This resolution requires a majority of more than three-fourths of the votes cast by members entitled to vote [Companies Act, Section 184(1)].
Contingent Purchase Contract: The contract outlines specific conditions that must be met before the company acquires the shares. This can be based on financial performance, a change in control, or other pre-defined events.
Expiry Date: The resolution must specify an expiry date for the authorization, which cannot be later than the next annual general meeting [Companies Act, Section 76D(3)].
Additional Considerations:
Disclosure: The company must disclose the details of the contingent purchase contract to shareholders in the notice for the general meeting [Companies Act, Section 184(3A)].
Market Regulations: Listed companies may need to comply with additional requirements from the Singapore Exchange (SGX) Listing Manual [Clause 948].
Listed companies can also acquire their own shares on the Singapore Exchange.
This eService allows you to file the notice of purchase or acquisition of ordinary/ preference shares and to update the changes in the company's share capital and shareholdings.
Here is some information to help you with the process of Notice of Purchase or Acquisition of Ordinary/Preference Shares/Stocks.
What information is required to complete this transaction?
1. Unique Entity Number (UEN)
2. Contact Number & Email Address
Entity information
UEN Entity Name
2123456789A ABC PTE. LTD.
Purchase/Acquisition of Shares Details
Type of Purchase or Acquisition Class of Shares
[Ordinary Shares/Stocks] [Ordinary Share]
Date of Purchase or Acquisition Pursuant to Section
[31/12/2016] [76D]
Number of shares purchased or acquired
[32813]
Number of shares cancelled
[0]
Amount of consideration paid for the purchase or acquisition of the shares (excluding stamp duty and other costs)
[100000]
Currency
[UNITED STATES OF AMERICA, DOLLARS]
Number of shares before purchase or acquisition and cancellation
[200000]
Issued capital before purchase or acquisition and cancellation
[176749.65]
Shares purchased out of
Capital [/] Profits [ ]
Does any corporation directly or indirectly hold any beneficial interest in shares?
[ ] Yes [ ] No
Amount of capital used for purchase or acquisition (excluding stamp duty and other costs)
[100000]
Section 76D of the Singapore Companies Act
Section 76D of the Singapore Companies Act deals with a company's authority to acquire its own shares through off-market purchases. Here's a breakdown of the key points:
Off-Market Share Acquisition:
Section 76D empowers companies to purchase their issued shares directly from shareholders, bypassing the stock exchange.
Types of Off-Market Acquisitions:
Equal Access Scheme (Section 76C): This method requires offering to buy shares from all shareholders on a proportional basis, ensuring fairness.
Selective Off-Market Acquisition (Section 76D): This allows companies to target specific shareholders for share purchases, providing more flexibility but requiring stricter regulations.
Key Provisions of Section 76D:
Special Resolution: A selective off-market buyback requires shareholder approval through a special resolution at a general meeting. This resolution needs a majority of more than two-thirds of the votes cast [Section 185(5)].
Disclosure: The company must disclose details of the proposed buyback, including the number of shares and purchase price, in the notice for the general meeting [Section 184(3A)].
Voting Restriction: Shareholders whose shares are targeted for purchase (and their associates) are not entitled to vote on the special resolution [Section 76D(3)].
Expiry Date: The resolution authorizing the buyback must specify an expiry date, typically not later than the next annual general meeting [Section 76D(3)].
Additional Considerations:
Listed Companies: Listed companies on the Singapore Exchange (SGX) might need to comply with additional requirements outlined in the SGX Listing Manual [Clause 948].
A company must file a “Notice of Cancellation or Disposal of Treasury Shares under S76K” transaction via BizFile+ to buy back its own shares. This buyback can be done for a number of reasons, including if the company has excess capital. However, share buybacks can also reduce the amount of profits available for distribution as dividends.
How Long It Takes to File
This transaction will take about 10 to 20 minutes to complete. It will be approved upon submission.
Additional Resources:
Here are some resources for further information:
Accounting and Corporate Regulatory Authority (ACRA)'s website provides a guide on share cancellation and buybacks: Cancellation of Shares and Share Buyback
Memorandum on Share Buybacks - Law Gazette
How Bestar SG can Help
Here's how Bestar SG is able to assist with cancellation of shares and share buybacks in Singapore:
Compliance Guidance: The process for share buybacks and cancellations can involve complex regulations set by ACRA and the SGX. Bestar SG specializes in corporate services and financial law. We could advise on ensuring the buyback or cancellation adheres to these regulations.
Documentation and Filings: There are various documents required for share buybacks, such as shareholder notices and filings with ACRA. Bestar SG could assist with preparing and filing these documents.
Tax Implications: Share buybacks can have tax consequences for the company and shareholders. Bestar SG has expertise in tax law. We could advise on these implications.
Shareholder Communication: Depending on the type of buyback, shareholder approval might be necessary. Bestar SG could help prepare communication materials and facilitate meetings for shareholders.
Finding Out More About Bestar SG's Services:
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