MARKETS

CMA issues guidelines on share buybacks

They address issues such as requirements for a shareholder’s circular, on-market transactions, minimum capital

In Summary
  • A share buyback, also known as share, repurchase is the acquisition by limited companies of its own shares.
  • The new guidelines complement the general provisions under Part XVI of Companies Act, 2015
Capital Markets Authority CEO Wyckliffe Shamiah.
Capital Markets Authority CEO Wyckliffe Shamiah.
Image: COURTESY

The Capital Markets Authority has announced the issuance of the guidelines on share buybacks for listed companies in Kenya which were gazetted on November 12 2021.

A share buyback, also known as share repurchase is the acquisition by limited companies of its own shares.

In a typical share buyback transaction, a company buys back its shares and then cancels them so that the amount of the company’s issued share capital is diminished by the nominal value of the cancelled shares.

This effectively leaves the remaining shareholders with larger stakes in the company.

The new guidelines complement the general provisions under Part XVI of Companies Act, 2015 through which share re-purchase was first introduced in Kenya.

However, the CMA guidelines on share buybacks go a step further to address circumstances that are specific to listed companies in such transactions.

The CMA Guidelines were drafted to provide a basis for additional disclosure requirements in the spirit of investor protection and to promote orderly capital markets,” said CMA Chief Executive Wyckliffe Shamiah.

They address issues such as requirements for a shareholder’s circular, on-market (Exchange) transactions, minimum capital, and free float requirement, share buyback relating to a class of shares and treatment of treasury shares.

Other issues addressed include the volume of shares to be purchased, disclosures to the Nairobi Securities Exchange, approval of delisting and privatisations by independent shareholder,s and applicability of the Capital Markets (Take-overs and Mergers) Regulations, 2002.

The Guidelines shall be read and applied together with the Companies Act 2015, for purposes of approval and compliance.