The Companies (Buy-Back of Shares) Rules, 1999
The Companies (Buy-Back of Share) Rules, 1999 were made by the Securities and Exchange Policy Board in exercise of the powers conferred by section 506 of the Companies Ordinance, 1984 read with section 95A thereof; and clause (b) of section 43 of the Securities and Exchange Commission of Pakistan Act, 1997. The Rules shall apply to listed companies. Buy-Back of shares generally mean to a situation in which a company purchases its own shares from the existing shareholders, for the benefit of the company. Under these rules the term “purchase” means purchase by the companies of their own shares. The company must have sufficient cash for purchase. A certificate of sufficient cash shall be obtained from the auditor in such time as provided by these rules. Such procedure for purchase shall be adopted as herein provided by these rules. The disclosure of such purchase shall be made in the balance sheet. Section 86 of the Companies Act 2017 provides that no company having a share capital, other than a listed company, shall have power to buy its own shares. A company opts for a buy-back in order to: improve shareholder value; use as a defense mechanism if there is threat of corporate takeover; improve intrinsic value of the shares, and use as a method of financial engineering.
