… as NGX amends share buyback rules
Iheanyi Nwachukwu
It’s a brand new world for Nigeria’s listed companies where every issuer is now required not to repurchase more than 15 percent of its issued shares over a period not exceeding two years from decision made at a board meeting.
This is noted in the recently approved amendments to NGX rules on share buyback released by the NGX RegCo in a notice signed by its CEO, Olufemi Shobanjo on Friday.
The new rule requires the share buy-back transaction to be approved by the shareholders through a special resolution passed at a general meeting. “The Issuer must send to its shareholders an Explanatory Statement (together with at the same time as the notice of the relevant shareholders’ meeting) containing all the information reasonably necessary,” it stated.
The rule is expected to enable shareholders to make informed decisions at the meeting on whether to vote for or against the ordinary resolution to approve the proposed share buyback purchase by the issuer of shares.
Companies are also expected to state to shareholders the total number and description of the shares which the issuer
proposes to repurchase buy back purchase. They shall also provide statements by the directors of the issuer indicating reasons for the
proposed purchase of shares buyback and statements by the directors of the issuer stating as to the proposed source of
funds which will be used to for making the proposed shares buyback purchase.
The NGX noted that the funds for making the proposed shares buyback shall be taken out of the profits of the company which would otherwise be available for distribution as dividend; or the proceeds of a fresh issue made for the purpose of the shares buyback purchase.
The new rule also requires issuers to state any material adverse impact on the working capital or gearing position of the issuer (as compared with the position disclosed in its most recent published audited accounts) in the event that the proposed shares buyback
purchases were to be carried out in full at any time during the proposed purchase shares buyback period, or an appropriate negative statement.
Companies are also required to state the names of any directors, and to the best of the knowledge of the directors having made all reasonable enquiries, any associates of the directors with an intention to sell shares to the issuer, or also state the consequences of any purchases which will arise under the Takeover Rules of which the directors are aware.
Also, if any, the issuer is to state what it intends to do with the repurchased shares such as whether it will reissue the shares, keep the shares as treasury shares, or issue the shares for the purpose of an employees’ share scheme.
No issuer shall purchase its own shares during its closed period.
The NGX Regulation (NGX RegCo) referred to the amended rules which stated: “Repurchase of Securities Buy-back
An Issuer of securities may repurchase buyback or otherwise acquire any listed admitted shares securities previously issued by it, in accordance with the Rules and Regulations of the Securities and Exchange Commission (SEC), Companies and Allied Matters Act, 2020, or other applicable legislation, provided that: The Articles of Association of the Issuer shall contain a clause authorising the Issuer to do
so; The Issuer shall not acquire more than fifteen percent (15 percent) of its issued shares; or such amount of shares as may be approved by the SEC from time to time.”
“The directors shall take a decision at a Board Meeting for the purchase of a specific volume and a range of volumes of shares over a period, not exceeding two (2) years and shall fix a date for the company’s meeting to seek the approval of shareholders.
“The decision of the directors for the purchase shall be communicated to The Exchange on the day of the Board Meeting. The Issuer shall obtain a “no objection” from The Exchange before embarking on a
share buyback programme,” it noted.
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