Guidelines on share buyback for listed companies

The CMA vide Gazette Notice No. 12325 issued guidelines for listed companies that intend to undertake share buybacks. Some of the salient directives in the Guidelines include;

1. The listed company may only buy back its shares if the Articles of Association of the listed company provide for share buybacks.
2. A proposal to buy back the shares of a listed company shall be approved by shareholders at a general meeting of shareholders before the share buyback is undertaken.

• If the buyback is through off-market purchases, that company shall submit the draft share buyback contract to the Authority for approval.

1. A listed company that intends to buy back its shares shall publish, within twenty-four hours of the board’s resolution approving the share buyback, and with the approval of the Authority, a public announcement of the intended share buyback in at least one newspaper of nationwide circulation and on the company’s website.
2. A listed company that undertakes a share buyback shall disclose to the securities exchange the details of the buyback transaction immediately after the buying back of the shares and the disclosure shall be published on the security exchange’s website.
3. A listed company shall not undertake a share buyback transaction during the period of fourteen days before the publication of the company’s half-yearly or annual financial statements; or after it has become aware of any material information which has not been made public which, if disclosed, could affect the price of the company’s shares.

• A listed company that undertakes a share buyback transaction shall submit to the Authority daily reports on the share buyback transaction undertaken and the treatment of the shares acquired by the listed company including reports on the price and volume of shares bought back and any treasury shares sold by the company.

The Guidelines will provide clarity on how listed companies may undertake share buyback transactions. We expect to see more share buy backs in the coming days, especially by listed companies whose directors believe that their shares are trading at significantly lower than their true value.