The Capital Markets Authority (CMA) has issued a set of fresh guidelines on buybacks for listed companies in Kenya which were gazetted in November this year.
The guidelines are drafted to provide a basis for additional disclosure requirements in the spirit of investor protection and to promote orderly capital markets.
“The new guidelines complement the general provisions under Part XVI of Companies Act, 2015 through which share repurchase 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,” says CMA Chief Executive Wycliffe Shamiah.
The new regulations address issues such as requirements for a shareholder’s circular, exchange transactions, approval of delisting and privatisations by independent shareholders and applicability of CMA regulations.
Others are minimum capital and free float requirement, share buyback relating to a class of shares and treatment of treasury shares and volume of shares to be purchased.
Buyback is a corporate action in which a company buys back its shares from the existing shareholders usually at a price higher than the market price. When it buys back, the number of shares outstanding in the market reduces.
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.
Consequently, this effectively leaves the remaining shareholders with larger stakes in the company.
The authority said the guidelines will be read and applied together with the companies law for the purpose of approval and compliance.
The latest listed company in the country to undergo share buyback is Nationa Media Group (NMG).
It completed a share buyback program which saw the group repurchase 17,101,352 million of its ordinary shares at the Nairobi Securities Exchange(NSE).