# Share Buy-Back and Treasury Shares

> Only a listed company may buy back its own shares under Section 127 of the Companies Act 2016 — subject to a solvency test, constitutional authority, a 10% limit, and financing out of retained profits. The shares purchased may be cancelled or held as treasury shares.

- Category: company-secretary
- Language: en
- Status: published
- Updated: 2026-08-07
- Canonical: https://negaraku.md/en/company-secretary/share-buy-back-treasury-shares

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A company may buy back its own shares and hold them "in treasury" — but only if it is listed, able to pay its debts, and stays within a strict 10% limit.

## Which companies may buy back their own shares?

Only a company whose shares are quoted on a stock exchange — that is, a listed company — is permitted to buy back its own shares, and only if its constitution allows it (s.127(1)). This is an exception to the general prohibition in Section 123 against a company financing dealings in its own shares. Private companies and unlisted public companies cannot use this mechanism.

> **Scope note:** The Bursa operational rules referred to below are contained in **Chapter 12 of the Listing Requirements** for the **Main Market** and the **ACE Market**. The rule numbers (12.03, 12.09, 12.10, and so on) are the same in both frameworks; a company should refer to the set of Listing Requirements corresponding to its market of listing.

## What are the conditions under Section 127?

Section 127(2) sets out three conditions that must be met before any purchase:

- **Solvent** — the company is solvent at the date of the purchase and will not become insolvent by incurring the debts involved in paying for the shares (s.127(2)(a)).
- **Through the exchange** — the purchase is made through the stock exchange on which the shares are quoted, in accordance with the rules of that exchange (s.127(2)(b)). Section 127(3) also permits an **off-market** purchase where the exchange's rules allow it.
- **Good faith** — the purchase is made in good faith and in the interest of the company (s.127(2)(c)).

Bursa Malaysia adds a practical layer: shareholders must approve a mandate by ordinary resolution at a general meeting (Rule 12.03), and that mandate is only valid until the conclusion of the next AGM (Rule 12.07(3)).

## How much may be bought, and financed from where?

The aggregate limit is **10%** — a company may not purchase or hold its own shares if the total purchased or held would exceed 10% of its total issued shares (Rule 12.09). The purchase must be financed **entirely out of the retained profits** of the company on a company, not group, basis (Rule 12.10). The purchase price, in turn, may not exceed **15%** above the 5-market-day weighted average market price before the purchase (Rule 12.17).

## What are treasury shares, and what can be done with them?

After the purchase, the directors may resolve to (s.127(4)): cancel the shares; hold them as **treasury shares**; or hold part as treasury shares and cancel the rest. Shares not held in treasury are deemed cancelled immediately on purchase (s.127(5)).

Treasury shares carry no right to vote or to receive dividends (s.127(8)), and are disregarded in calculating holding thresholds such as substantial shareholdings, takeovers or quorum (s.127(9)).

Under s.127(7), the directors may:

- distribute the shares as share dividends;
- resell the shares on the exchange in accordance with its rules;
- transfer the shares under an employee share scheme;
- transfer the shares as consideration for a purchase;
- cancel the shares; or
- deal with the shares for any other purpose prescribed by the Minister.

## What are the notification procedures and deadlines?

| Action | Obligation | Period |
|---|---|---|
| Notice of purchase to the Registrar & exchange | s.127(16) | 14 days from the date of purchase |
| Announcement of purchase to Bursa | Rule 12.19 | By 6.30 pm on the same day at the latest |
| Announcement of resale/transfer of treasury shares | Rule 12.20 | By 6.30 pm on the same day at the latest |
| Announcement of cancellation of shares | Rule 12.21 | By 6.30 pm on the same day at the latest |

## What are the penalties for non-compliance?

Contravening the conditions of purchase in s.127(2) is an offence: a fine of up to **RM500,000** or imprisonment of up to **5 years** or both (s.127(17)). Failure to lodge the notice of purchase under s.127(16) may attract a fine of up to **RM50,000**, and a further fine of up to RM1,000 per day for a continuing offence (s.127(18)).

## Next steps

- Confirm that the company's constitution permits share buy-backs before seeking a shareholders' mandate.
- Prepare the Share Buy-back Statement in accordance with Bursa Appendix 12A to accompany the notice of general meeting.
- Review the latest retained profits balance and ensure the solvency test is satisfied at each purchase date.
- Lodge the s.127(16) notice with SSM and Bursa within 14 days of each purchase.

## Sources

- Companies Act 2016 (Act 777), Section 127 — Purchase by a company of its own shares — https://www.mof.gov.my/portal/pdf/bahagian/gic/Companies_Act_2016_Act_777.pdf (Laws of Malaysia / Kementerian Kewangan Malaysia)
- Main Market Listing Requirements — Chapter 12: Share Buy-Backs — https://www.bursamalaysia.com/regulation/listing_requirements/main_market (Bursa Malaysia Securities Berhad)
- ACE Market Listing Requirements — Chapter 12: Share Buy-Backs — https://www.bursamalaysia.com/regulation/listing_requirements/ace_market (Bursa Malaysia Securities Berhad)

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