First published in The Business Times on March 25, 2021

By Chew Yi Hong and Mak Yuen Teen

In the November 2018 Regulator’s Column, the CEO of Singapore Exchange Regulation (SGX Regco) sets out very clearly what the regulator expects of companies conducting share buybacks. However, it appears that issuers are not paying heed to his message.

RULES ON SHARE BUYBACKS

Subject to prior shareholders’ approval obtained via a share buyback mandate at a company’s annual general meeting, a company may buy back its shares through on-market transactions or off-market acquisitions on an equal access scheme. Based on an earlier study of annual general meetings (AGMs) in 2016 by the authors, approximately 46 per cent of companies with a primary listing in SGX obtained a share buyback mandate from shareholders.

Share buybacks serve as a useful capital management tool. However, like any market trading activities, they are subject to relevant market conduct provisions of the Securities and Futures Act (SFA).

SGX Regco has rightly warned that share buybacks should not be used to carry out any form of market misconduct such as insider trading or creating a false market. A company should not undertake share buybacks during periods when it is in possession of inside information.