Companies Buy-Back of Shares - SECP
Friday, January 23, 2009
Section 95A of the Ordinance, recently notified by the Federal Government allows the listed companies to buy-back/repurchase their own shares and hold such shares as Treasury Shares, whereas under the old Section 95A, the repurchased shares were required to be cancelled. The buy-back /repurchase may be used as a tool to bring stability in market prices of the shares that are undervalued on the stock market. Buy-back/repurchase of shares by listed companies may consequently improve earning per share.
Conditions for Purchase of Shares:
(1) A company may Purchase its own shares if it fulfills the following conditions:
- it has paid-up capital of not less than two hundred million rupees ;
- based on the latest audited accounts, its total debt is not more than three (3) times of its equity, and its current assets are not less than its current liabilities;
- its Free Float is not less than one hundred million rupees (face value);
- after the Purchase, its Free Float is not less than the threshold given below:
Paid-up capital Rs. 200 million to Rs. 500 million, not less than 40%
Above Rs. 500 million to Rs. 1,000 million, not less than 20% or Rs. 200 million (whichever is higher)
Above Rs. 1,000 million to Rs. 5,000 million, not less than 10% or Rs. 250 million (whichever is higher)
Above Rs. 5,000 million, not less than 10% or Rs. 500 million (whichever is higher) - it has obtained approval by way of special resolution held within a period of five (5) weeks of the date of meeting of the board of directors proposing the Purchase;
- it has obtained auditors’ certificate, certifying that the Purchasing Company has sufficient funds for the Purchase; and
- the directors including the chief executive of the Purchasing Company, by way of a resolution passed by not less than seventy five percent of the total number of directors at a meeting, have made a declaration that the Purchasing Company is solvent.
(2) A company that has obtained relaxation, if any, from the requirements of listing regulations of any stock exchange of the country or rule 9 of the Companies (Issue of Capital) Rules, 1996 regarding minimum allocation of capital to the general public, shall not Purchase shares under the Regulations unless the condition relating to increase in paid-up capital or relating to disinvestment of shares by the sponsoring shareholders, imposed at the time of granting such relaxation by the Commission or the stock exchange (s) is met.
(3) A share that has not completed at least two anniversaries of its formal listing on a stock exchange shall not be eligible for Purchase under the Regulation.
(4) These Regulations shall not be applicable on buy-back of shares made for delisting of a company.
(5) A company shall not purchase shares in case any petition for its winding up has filed with a court.
(6) During the Purchase Period, a Purchasing Company shall not file petition for voluntary winding up.
Read the complet draft of the said Regulations here!
Labels: Compnay Law
posted @ 10:26 AM,
1 Comments:
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At January 16, 2015 at 3:34 PM,
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