Share Repurchase
Share repurchase, also known as buyback, is a process where a company buys back its own shares from the market. In Hong Kong, there have been recent changes to the regulations regarding share repurchases, specifically concerning treasury shares.
Here's a breakdown of the key points:
Repurchase and Cancellation: Previously, repurchased shares had to be cancelled. However, a new regime introduced in June 2024 allows companies to hold these shares as treasury shares. [Hong Kong Stock Exchange – new regime for treasury shares]
Resale of Treasury Shares: Companies can now resell treasury shares, but there are restrictions. A 30-day moratorium period applies after repurchasing shares before they can be resold on the market. There are also limitations on repurchasing shares on-market after an on-market resale of treasury shares. [Share Buy-Backs in Hong Kong: What to Know]
Approval Process: The process for share repurchases depends on whether it's an on-market or off-market repurchase. On-market repurchases typically require shareholder approval, while off-market repurchases require approval from the Securities and Futures Commission (SFC) of Hong Kong. [203 1. Methods of share repurchase]
For more details, you can refer to resources from the Hong Kong Stock Exchange (HKEX) and the SFC:
HKEX Share Repurchases Reports: [Share Repurchases Reports - HKEXnews] (This provides archives, not current regulations)
SFC Share Repurchase Code: https://www.sfc.hk/-/media/EN/assets/components/codes/files-current/web/codes/the-codes-on-takeovers-and-mergers-and-share-buy-backs/the-codes-on-takeovers-and-mergers-and-share-buy-backs.pdf
Can a Private Company Purchase its Own Shares
A private company in Hong Kong can purchase its own shares, but there are some specific regulations to follow:
Funding Source: There are two main options for funding the share repurchase:
Distributable Profits or New Share Issue: This is the preferred method and doesn't require special approvals. The company uses its available profits or proceeds from issuing new shares to buy back existing ones.
Company Capital: This method requires a solvency test to ensure the repurchase won't harm the company's financial health. Additionally, it requires shareholder approval through a special resolution. [New Companies Ordinance (Chapter 622) - Highlights]
Approval Process:
On-Market Repurchase: This typically doesn't require specific approval as long as it's done with distributable profits or new share proceeds.
Off-Market Repurchase: This usually requires a contract authorized beforehand by a special resolution from shareholders, regardless of the funding source.
Here are some resources for further information:
Company Law Guidance Note (Sixth Issue) — Share repurchase by a Hong Kong Company: Hong Kong Certified General Accountants Association [URL]
Hong Kong Company Share Buyback Procedures and Fees: Bestar Asia
How Bestar can Help
Here's how Bestar can help with share repurchases in Hong Kong:
Understanding the Regulations: Bestar has expertise in Hong Kong accounting regulations, including the latest updates on share repurchases and treasury shares. We can help you navigate the complexities of:
Approval Processes: Whether you require shareholder approval or approval from the SFC, Bestar can guide you through the necessary steps and ensure your repurchase complies with regulations.
Funding Methods: We can advise on the most suitable method for funding your share repurchase, considering factors like solvency tests and available profits.
Transaction Support:
Documentation: Bestar HK can assist with preparing the necessary documentation for share repurchases, ensuring everything is accurate and compliant.
Recordkeeping: We can help maintain proper records of your share repurchase transactions for future reference and audits.
Additional Considerations:
Tax Implications: Repurchases may have tax implications for both the company and shareholders. Bestar has tax specialists who can advise on potential tax liabilities.
Financial Analysis: We can analyze your financial situation to determine if a share repurchase is a sound financial strategy for your company.
Overall, Bestar can act as a valuable partner throughout the share repurchase process in Hong Kong, providing guidance, support, and ensuring compliance with regulations.
Reach out to Bestar to discuss your specific needs and inquire about our share repurchase support services.
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