New framework: SECP notifies share buy-back regulations

Allows listed firms to either cancel or retain purchased shares

KARACHI: The Securities and Exchange Commission of Pakistan (SECP) has notified the Listed Companies (Buy-Back of Shares) Regulations 2016, a press release said on Monday.

The regulations will be applicable to the buy-back of own shares by listed companies. The regulations provide for either cancellation of the purchased shares or retaining the same as treasury shares.

The earlier framework for buy-back did not provide for retaining the purchased shares as treasury shares, rather the purchased shares had to be cancelled.

Buy-back of own shares by listed companies is normally undertaken for stabilising the market price of their shares, particularly when the market is passing through a bearish phase. The regulations have been finalised after obtaining public comments and holding consultation sessions with key stakeholders.

The regulations encompass the eligibility criteria for buy-back, like maintaining the minimum paid-up capital and free float, authorisation of the purchase with the approval by members of the purchasing company by way of a special resolution, the purchase methods, appointment of the manager to purchase, procedure for setting the purchase price, restrictions, rights and privileges of the treasury shares, limitation on treasury shares and maintaining the record thereof.

“It is expected that the regulations will help the listed companies to buy back their own shares in a transparent manner to achieve the desired purpose in the best interest of the purchasing company, the shareholders and the capital market,” it said.

Published in The Express Tribune, August 9^th, 2016.

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