There is no concern that the capital reduction will result in odd-numbered shares held by shareholders, as capital reductions do not necessarily involve a reduction in the number of shares, and a cash distribution can be made by reducing a corresponding dollar amount of a company`s share capital. What does the share buyback law say in Singapore? Distribution of dividends. Companies can return money to shareholders through a direct dividend distribution, which can be implemented through board or shareholder resolutions, or both. However, a company can only declare and pay final dividends from distributable profits and not from share capital. In determining whether the company has sufficient distributable profits, it can take into account both current and previous year profits. With regard to the profit of the current year, a company is not obliged to use its profits of the current year to offset the accumulated losses of previous years and can distribute these profits in the form of dividends. Retained earnings from previous years may also be distributed, including reserves created by the revaluation of assets, provided that the revaluation is not subject to short-term fluctuations and has been independently reviewed by professional valuators. The Ministry of Finance has announced (the “Announcement”) that effective October 1, 2013, the limit on the total number of ordinary or preferred shares that a company incorporated in Singapore may repurchase under the Companies Act will increase from 10% to 20%. This increase does not apply to companies listed on SGX-ST that remain subject to the existing share buyback limit of 10%. With regard to the tax implications for the shareholder, if a capital reduction is made from the contributed share capital of a company, shareholders will be treated as if they had simply received a return of capital and the cost of their investment in the remaining shares would be reduced accordingly by the amount of capital repaid. If the capital reduction is not made from the contributed share capital of the company, the payment to its shareholders is considered a dividend and is therefore exempt from tax for the shareholder, as the company is tax resident in Singapore and subject to the one-tier system.

Listed companies can also buy their own shares on the Singapore Stock Exchange. (c) acquire own shares under a conditional purchase agreement after the members have taken a specific decision authorising such acquisition. – the maximum price to be paid by the company for such an acquisition of shares. The maximum price thus fixed may be determined either by indicating a given price or by providing the basis for calculating that price. A company may proceed with a capital reduction by obtaining the necessary shareholder approval, followed by High Court approval or a “court-free” procedure requiring each director of the company to file a declaration of solvency. In practice, directors may be reluctant to provide proof of solvency because they must vouch for the entity`s ability to repay its debt for a period of 12 months after the capital reduction. If an administrator submits an erroneous credit declaration without reasonable cause, they may be held criminally liable, including fines and/or imprisonment. Therefore, most companies in Singapore still prefer the “court approval” route. Shares acquired or acquired as such may be cancelled immediately after purchase or acquisition. In the event of cancellation, the certificates relating to such share repurchase will be cancelled and destroyed by the Company as soon as practicable after settlement of such purchase, and all rights and privileges associated with such shares will expire upon cancellation. Following the announcement, this limit was increased to 20% for Singapore-incorporated companies that are not listed on SGX-ST.

The Department of Finance said the increase in share buybacks should give a company greater flexibility in acquiring its own shares and is consistent with practice in other jurisdictions. Despite the increase in the share buyback limit, the interests of shareholders and creditors remain protected as the current regime provides certain legal safeguards (in the form of shareholder consent, solvency requirements, disclosure obligations, etc.).