In addition to ensuring that the interests of creditors are protected and not affected by the return of capital, the prohibition on share buybacks is motivated by the protection of shareholders against the risk of abuse by company executives, who may increase their voting rights when the company buys back its shares or induces the purchase of its own shares at excessive prices. The ban on share repurchases also protects the invested public from manipulation of the share price by companies that can use share buybacks to support their share prices. The Ministry of Finance (MOF) stated that this increase in the ceiling allowed a Singapore-based company to have more flexibility in the repurchase of its shares and referred to corporate law in other legal systems. B such as the United States, Canada, the United Kingdom and Hong Kong, which do not include share repurchase restrictions. Although the new 20% limit applies to all Singapore-based companies, SGX listed companies remain subject to the existing 10% limit, as currently provided by SGX`s listing legislation. This approach is consistent with practice in other jurisdictions where publicly traded companies are subject to a stricter share repurchase limit imposed by the stock exchanges by their listing rules and not by corporate law rules. The Companies Act contains appropriate safeguards, which have been formulated to ensure that share repurchases are not made to the detriment of shareholders and creditors. This includes: Learn more about trading stocks, including how to establish a trading plan and open a position. There are four ways in which a company can acquire its own shares: despite the general prohibition on share repurchases, the Companies Act allows a company to repurchase common shares and preferred shares if certain pre-established requirements are met. Share repurchase rules were introduced to provide companies with a useful and inexpensive opportunity to return cash to shareholders.
Such share repurchases allow a company to be flexible in the temporality, procedure and amount of capital that must be returned to shareholders. This increases a company`s ability to adjust its capital structure and capital ratio and can improve a company`s return on investment for the benefit of shareholders. Despite the increase in the limit, corporate share repurchases must continue to meet the requirements of the Corporate Act. As noted above, these requirements were intended to protect the interests of shareholders and creditors. The share price is likely to rise due to the reduction in supply, as will earnings per share. In the case of private companies, share repurchases can be useful because (i) they provide a mechanism for companies to resolve disputes with dissenting members and (ii) authorize the use of a company`s funds for the purchase of shares of an outgoing member, instead of requiring the remaining members to raise funds for such a purchase.