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General
The Amendment Ordinance aims to:-
(i) provide a legal framework for listed companies to hold shares bought back as treasury shares and to dispose of them, which will provide more flexibility for listed companies to manage their share capital; and
(ii) promote paperless corporate communication for both listed and unlisted companies by introducing a new implied consent mechanism for dissemination of corporate communication to members and debenture holders by means of website in addition to the existing express consent or deemed consent mechanism.
The Amendment Ordinance will come into operation on 17 April 2025.
Treasury Share Regime
The major elements of the treasury share regime introduced by the Amendment Ordinance include:
(a) providing that a listed company may, upon buy-back of its own shares, hold those shares in its own names or through a nominee as treasury shares;
(b) setting out that treasury shares may be cancelled, transferred (whether or not for a consideration) or sold. Any transfer or sale of treasury shares shall be subject to the same approval requirements as applied to the allotment of new shares;
(c) setting out that a company holding treasury shares in its own name or through its nominee must enter its name or the name of its nominee in the register of members of the company. However, subject to certain exceptions, the company or its nominee should not, in respect of the treasury shares, be regarded as a member of the company for the purposes of the Companies Ordinance (Cap. 622) or as a member, a shareholder or a contributory of the company for the purposes of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32);
(d) setting out that all rights attached to treasury shares, including but not limited to the right to attend and vote at general meetings, the right to receive dividends and the right to receive any distribution of the company’s assets, would be suspended. However, the right to the allotment of shares as fully paid bonus shares in respect of treasury shares would not be affected and such fully paid bonus shares are to be regarded as being bought back on their allotment;
(e) setting out that for corporate matters such as passing an ordinary or a special resolution of members, calling a general meeting, making an application to court, etc., and exercising the right by minority members to require an offeror to acquire shares in a takeover offer, etc., treasury shares should be excluded from the number of the issued shares of the company and the total voting rights in respect of shares of the listed company when calculating the relevant thresholds;
(f) setting out that a listed company should be required to state the number of shares bought back and held as treasury shares in a return which is required to be delivered to the Registrar of Companies (the “Registrar”) for registration (irrespective of whether the shares are cancelled or held as treasury shares; and
(g) setting out that a listed company should be required to deliver to the Registrar for registration:
(a) providing that a listed company may, upon buy-back of its own shares, hold those shares in its own names or through a nominee as treasury shares;
(b) setting out that treasury shares may be cancelled, transferred (whether or not for a consideration) or sold. Any transfer or sale of treasury shares shall be subject to the same approval requirements as applied to the allotment of new shares;
(c) setting out that a company holding treasury shares in its own name or through its nominee must enter its name or the name of its nominee in the register of members of the company. However, subject to certain exceptions, the company or its nominee should not, in respect of the treasury shares, be regarded as a member of the company for the purposes of the Companies Ordinance (Cap. 622) or as a member, a shareholder or a contributory of the company for the purposes of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32);
(d) setting out that all rights attached to treasury shares, including but not limited to the right to attend and vote at general meetings, the right to receive dividends and the right to receive any distribution of the company’s assets, would be suspended. However, the right to the allotment of shares as fully paid bonus shares in respect of treasury shares would not be affected and such fully paid bonus shares are to be regarded as being bought back on their allotment;
(e) setting out that for corporate matters such as passing an ordinary or a special resolution of members, calling a general meeting, making an application to court, etc., and exercising the right by minority members to require an offeror to acquire shares in a takeover offer, etc., treasury shares should be excluded from the number of the issued shares of the company and the total voting rights in respect of shares of the listed company when calculating the relevant thresholds;
(f) setting out that a listed company should be required to state the number of shares bought back and held as treasury shares in a return which is required to be delivered to the Registrar of Companies (the “Registrar”) for registration (irrespective of whether the shares are cancelled or held as treasury shares; and
(g) setting out that a listed company should be required to deliver to the Registrar for registration:
(i) a return in respect of the sale or transfer of treasury shares if the company sells or transfers any of its treasury shares; and
(ii) a return in respect of the cancellation of treasury shares if the company cancels any of its treasury shares.
(ii) a return in respect of the cancellation of treasury shares if the company cancels any of its treasury shares.
The treasury share regime is only applicable to listed companies.
According to section 270(1) of the Companies Ordinance (Cap. 622), a company that buys back any shares must, within 15 days after the date on which the shares are delivered to the company, deliver a return in the specified form (Form NSC2) to the Registrar of Companies for registration.
If a listed company decides to hold the shares bought back as treasury shares, the company must report the number of shares bought back that are held as treasury shares in the above-mentioned return (i.e. Form NSC2).
[Please refer to sections 270(1) and 270(2)(d)(iii) of the Companies Ordinance (Cap. 622)]
If a listed company decides to hold the shares bought back as treasury shares, the company must report the number of shares bought back that are held as treasury shares in the above-mentioned return (i.e. Form NSC2).
[Please refer to sections 270(1) and 270(2)(d)(iii) of the Companies Ordinance (Cap. 622)]
Effect on the issued share capital of a listed company at the time of shares buy-back
According to section 269(2) of the Companies Ordinance (Cap. 622), if shares were bought back out of capital by a company, the amount of its issued share capital will be reduced by the total amount of the price paid by the company for the shares.
[Please refer to section 269(2) of the Companies Ordinance (Cap. 622)]
Effect on the issued share capital and the number of issued shares of a listed company for holding shares bought back as treasury shares
Holding of shares bought back as treasury shares would neither affect the amount of issued share capital nor the number of issued shares of the company.
According to section 269(2) of the Companies Ordinance (Cap. 622), if shares were bought back out of capital by a company, the amount of its issued share capital will be reduced by the total amount of the price paid by the company for the shares.
[Please refer to section 269(2) of the Companies Ordinance (Cap. 622)]
Effect on the issued share capital and the number of issued shares of a listed company for holding shares bought back as treasury shares
Holding of shares bought back as treasury shares would neither affect the amount of issued share capital nor the number of issued shares of the company.
There is no provision in the Companies Ordinance (Cap. 622) which requires listed companies to report their treasury shares held to the Companies Registry on a periodic basis.
For cancellation of treasury shares, listed companies must deliver a return in the specified form (Form NSC23) to the Registrar of Companies for registration within 15 days after the date on which the shares are cancelled.
[Please refer to section 272E(1) and section 272E(2) of the Companies Ordinance (Cap. 622)]
[Please refer to section 272E(1) and section 272E(2) of the Companies Ordinance (Cap. 622)]
Cancellation of treasury shares held by a listed company will not affect the amount of issued share capital of the company while the number of issued shares of the company will be reduced by the number of treasury shares cancelled.
According to section 272B(2) of the Companies Ordinance (Cap. 622), if a listed company is delisted, all its treasury shares are to be regarded as cancelled on the company being delisted. The company must deliver a return in the specified form (Form NSC23) to the Registrar of Companies for registration within 15 days after the date on which the treasury shares are regarded as cancelled.
[Please refer to sections 272B(2) and 272E(2) of the Companies Ordinance (Cap. 622)]
[Please refer to sections 272B(2) and 272E(2) of the Companies Ordinance (Cap. 622)]
For any sale or transfer of treasury shares, listed companies must deliver a return in the specified form (Form NSC22) to the Registrar of Companies for registration within 15 days after the date of sale or transfer.
[Please refer to section 272F(1) of the Companies Ordinance (Cap. 622)]
[Please refer to section 272F(1) of the Companies Ordinance (Cap. 622)]
If the treasury shares are sold or transferred for a consideration, the amount of issued share capital of the listed company will increase accordingly while the number of issued shares of the listed company will not change.
The particulars of a listed company which holds treasury shares of 5% or more of the issued shares in any class of the company’s shares should be reported as particulars of member of the company in Schedule 2 of the annual return (Form NAR1) of the company.
Subject to aforesaid, a listed company shall not be regarded as a member of the company for the purposes of the Companies Ordinance (Cap. 622) in respect of the treasury shares held by it.
[Please refer to section 272C(2)(a) of the Companies Ordinance (Cap. 622)]
Subject to aforesaid, a listed company shall not be regarded as a member of the company for the purposes of the Companies Ordinance (Cap. 622) in respect of the treasury shares held by it.
[Please refer to section 272C(2)(a) of the Companies Ordinance (Cap. 622)]
Yes. However, for the purposes of the Companies Ordinance (except section 2 of Schedule 6), the listed company or its nominee shall not be regarded as a member of the company in respect of the relevant treasury shares.
[Please refer to section 272C of the Companies Ordinance (Cap. 622)]
[Please refer to section 272C of the Companies Ordinance (Cap. 622)]
All rights attached to the treasury shares are to be regarded as suspended. The right to be regarded as suspended include:
(1) the right to attend or vote at any of the company’s meetings;
(2) the right to receive any dividends purported to be paid for those shares; and
(3) the right to receive any distribution of the company's assets in the form of cash or otherwise (including any distribution of assets to members on a winding up) in respect of those shares. However, right to allotment of shares as fully paid bonus shares in respect of treasury shares shall not be affected.
[Please refer to section 272H of the Companies Ordinance (Cap. 622)]
Bonus shares allotted in respect of treasury shares held by a listed company are to be regarded as being bought back by the listed company on their allotment, and similar to other shares bought back, the listed company may decide whether to hold these shares as treasury shares.
If the listed company decides not to hold the bonus shares allotted as treasury shares, the shares are to be regarded as cancelled on allotment.
[Please refer to section 272I of the Companies Ordinance (Cap. 622)]
If the listed company decides not to hold the bonus shares allotted as treasury shares, the shares are to be regarded as cancelled on allotment.
[Please refer to section 272I of the Companies Ordinance (Cap. 622)]
According to section 142(1) of the Companies Ordinance (Cap. 622) (the “CO”), for the bonus shares allotted in respect of the treasury shares held by a listed company, the listed company must deliver a return of allotment (Form NSC1) to the Registrar of Companies for registration within one month after the allotment of shares.
Bonus shares allotted in respect of treasury shares are to be regarded as being bought back by the listed company on their allotment, similar to other shares bought back. According to section 270(1) of the CO, a company that buys back any shares must, within 15 days after the date on which the shares are delivered to the company, deliver a return in the specified form (Form NSC2) to the Registrar of Companies for registration. As such, the company must specify the number of bonus shares that are held as treasury shares in the return (Form NSC2).
[Please refer to sections 142(1), 270(1), 270(2)(d)(iii) and 272I of the Companies Ordinance (Cap. 622)]
Bonus shares allotted in respect of treasury shares are to be regarded as being bought back by the listed company on their allotment, similar to other shares bought back. According to section 270(1) of the CO, a company that buys back any shares must, within 15 days after the date on which the shares are delivered to the company, deliver a return in the specified form (Form NSC2) to the Registrar of Companies for registration. As such, the company must specify the number of bonus shares that are held as treasury shares in the return (Form NSC2).
[Please refer to sections 142(1), 270(1), 270(2)(d)(iii) and 272I of the Companies Ordinance (Cap. 622)]
