BUY BACK OF COMPANY'S SHARES (Implementation)

Dr Ker Sin Tze asked the Minister for Finance whether he will consider allowing companies to buy back their shares from the market and, if so, whether such a scheme will be implemented in the near future.

Dr Richard Hu Tsu Tau: Mr Speaker, Sir, the share buy-back proposal is in fact included in the Companies (Amendment) Bill 1998 being tabled today. It had been developed after extensive consultation with the Stock Exchange of Singapore (SES), the Association of Banks of Singapore (ABS), the Singapore Merchant Bankers' Association (SMBA), the Law Society, companies and industry participants. The proposal will be implemented when Parliament has discussed and agreed to pass the Bill, which will hopefully be in November or earlier.

The amendment, if passed, will allow the purchase or acquisition by a company of its own shares, without having to apply to court for approval. Currently, a company can only return capital to its shareholders by way of a capital reduction under section 73, which requires confirmation by the High Court. This can be a time-consuming and expensive process. Capital reduction also does not give listed companies the same flexibility as a share repurchase in terms of the method, timing and amount of capital to be returned to shareholders.

Appropriate safeguards and disclosure requirements have been incorporated in the proposed amendments to ensure that share buy-backs by companies will not be abused to the detriment of shareholders and creditors. The details are set out in the Companies (Amendment) Bill 1998.

Additional safeguards for public listed companies will be formulated by the Stock Exchange of Singapore as part of its listing rules.