ISLAMABAD: The Senate Standing Committee on Finance, Revenue, Economic Affairs, Statistics and Privatisation has approved the amendments proposed by the SECP to Section 95-A of the Companies Ordinance, 1984.

All listed companies would now be able to purchase their own shares and hold them as treasury shares. The concept of treasury shares already exists internationally in countries, such as Malaysia, Singapore, US, UK, Australia and Japan.

The existing section allows companies to buy back shares but requires cancellation of the shares.

Under the amended Section 95-A, a listed company will be able to buy back its shares and retain them as treasury shares if it believes that its shares are being traded in the market below their fair value.

As treasury shares have no entitlement for cash dividend, they can be used as an effective measure for bringing stability in the market and improve the earnings per share of a company’s stock.

The amended section requires purchase to be made either through tender offer or through stock exchange against cash and out of the distributable profits or reserves of the company. The company can dispose of treasury shares in the manner to be prescribed by the SECP through regulations.

Published in Dawn, July 30th, 2015

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