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Share Buy-Backs

Share Buy-Backs

Listed companies in Hong Kong have four main ways to conduct share buy-backs:

  • On-market buy-back: This is the most common method, where the company repurchases shares through the Stock Exchange of Hong Kong (HKEX).

  • Exempt buy-back: This covers limited situations like employee share option schemes, with specific rules depending on the type.

  • General offer buy-back: The company offers to buy back shares from all shareholders at a predetermined price.

  • Off-market buy-back: This is any buy-back that doesn't fall under the other categories and requires approval from the Securities and Futures Commission (SFC) and shareholders.

Here are some additional things to know about buy-backs in Hong Kong:

  • There are restrictions on companies repurchasing their shares during certain times, like when they are in possession of undisclosed financial information.

  • The Securities and Futures Commission (SFC) has Codes on Takeovers and Mergers (and Share Buy-backs) that outline best practices to ensure fair treatment of shareholders.

  • You can find more details about the regulations and procedures on the HKEX website and the SFC website.

Non-Listed Companies

Non-listed companies in Hong Kong also have the ability to buy back their own shares, but the process is different from listed companies. Here's what you need to know:

  • Approval process: Unlike listed companies, non-listed companies don't require approval from the Stock Exchange (HKEX) for buybacks.

  • Solvency Test:  A crucial aspect is a "solvency test." The company must ensure the buyback won't leave them financially unstable.

  • Funding: They can use their distributable profits or proceeds from a fresh issue (selling new shares) to fund the buyback.

  • Shareholder Approval:  A special resolution by shareholders is required to authorize the buyback contract. This involves making the contract details available for inspection before a general meeting where shareholders vote.

  • Regulations: The Companies Ordinance outlines the specific regulations for share repurchases by non-listed companies.

Here are some resources for further details:

How Bestar can Help

Bestar can assist with a share buy-back process. Our area of expertise lies in the financial and legal aspects involved. Here's how we are able to help:

  • Solvency Assessment: Bestar could help assess your company's financial health to ensure the buyback wouldn't violate solvency requirements.

  • Regulatory Compliance: We provide guidance on navigating the Companies Ordinance regulations for non-listed company share buybacks.

  • Contract Drafting and Review:  Our expertise could be valuable in drafting and reviewing the share buyback contract that needs shareholder approval.

  • Meeting Procedures:  We assist with the procedures for holding the general shareholder meeting where the buyback contract is voted on.

  • Tax Implications:  There could be tax implications associated with the buyback, and Bestar offers advice on navigating those.

It's important to note that this is just a general overview.  To get the most accurate information on how Bestar can help with your specific situation, contact us. We can provide tailored advice based on your company's needs and the details of the proposed share buyback.

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