Treasury Share Reforms to Improve Flexibility of Share Repurchase Plan

New legislation enabling Hong Kong-incorporated listed companies to hold treasury shares is expected to boost share repurchase activities.

Key Regulatory Changes

The Companies (Amendment) Ordinance 2025, effective from 17 April 2025, introduces significant reforms that align Hong Kong with other major jurisdictions including Bermuda, the Cayman Islands, and China. The amendment permits Hong Kong-incorporated listed companies to retain repurchased shares as treasury stock rather than cancelling them.

Market Impact and Opportunities

This regulatory shift is anticipated to enhance Hong Kong’s attractiveness as a listing venue and create strategic advantages for companies incorporated in the jurisdiction. Currently, only 8% of Hong Kong-listed companies are affected by the existing prohibition on holding treasury shares, according to data from Hong Kong Exchanges and Clearing Ltd.

Strategic Applications for Treasury Shares

The amendments enable Hong Kong-incorporated companies to utilize treasury shares in several ways:

Reselling in small lots at full market value as an alternative to traditional discounted share placements
Transferring shares as consideration for employee share schemes
Using upon conversion of convertible securities
Potentially employing as currency for mergers and acquisitions
Possibly utilizing as security for debt financing arrangements

Additional Reforms

The ordinance also streamlines corporate communications by allowing companies to distribute materials via website without requiring shareholder consent. For unlisted companies, separate notifications to shareholders become unnecessary when prior express consent has been obtained.