Under Section 127 of the Companies Act 2016, a company whose shares are quoted on a stock exchange may buy back its own shares if authorised by its constitution, the company is solvent, the purchase is made through the exchange in good faith, and it does not exceed the 10% limit of its issued shares. (Section 127(3) also permits an off-market purchase where the exchange's rules allow it.) The shares purchased may be cancelled or held as treasury shares, which carry no voting or dividend rights. Notice of the purchase must be lodged with the Registrar and the exchange within 14 days.
- Only a listed company (shares quoted on an exchange) may buy back its own shares — s.127(1).
- Three conditions under s.127(2): solvent, made through the exchange in accordance with its rules, and in good faith in the interest of the company.
- Aggregate limit of 10% of total issued shares, financed entirely out of retained profits (Chapter 12 of the Bursa Listing Requirements — Main Market & ACE Market, Rules 12.09 & 12.10).
- Notice of purchase to the Registrar and the exchange within 14 days — s.127(16); failure to comply carries a fine of up to RM50,000 under s.127(18).
Who this applies to: Company secretaries, directors and advisers of listed public companies considering a share buy-back.
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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.
Can a private company (Sdn Bhd) buy back its own shares under Section 127?
No. Section 127(1) only permits a company whose shares are quoted on a stock exchange, that is, a listed company. Private companies and unlisted public companies cannot use this mechanism.
Do treasury shares carry voting and dividend rights?
No. Under s.127(8), treasury shares carry no right to attend or vote at meetings, nor any right to receive dividends or other distributions. They are also disregarded in calculating holding thresholds (s.127(9)).
Where can the funds for a share buy-back be drawn from?
The purchase must be financed entirely out of the company's retained profits on a company (not group) basis — Rule 12.10 of Chapter 12 of the Bursa Listing Requirements. Borrowings may be used as a source of funds provided the purchase is supported by an equivalent amount of retained profits (Rule 12.11).
The following are deliberately unstated or described only qualitatively until confirmed by a subject-matter expert:
- Sahkan URL rasmi PDF Bab 12 (Share Buy-Backs) Keperluan Penyenaraian Pasaran Utama dan Pasaran ACE terus dari bursamalaysia.com (WebFetch disekat 403 semasa pas pembetulan ini) dan pastikan nombor kaedah 12.03/12.07(3)/12.09/12.10/12.11/12.17/12.19/12.20/12.21 serta Apendiks 12A masih sepadan dalam edisi terkini.
- Sahkan sama ada artikel patut memberi fokus kepada Pasaran Utama, Pasaran ACE, atau kedua-duanya; nombor kaedah adalah sama dalam kedua-dua rangka kerja tetapi harga rujukan dokumen berbeza.
- Sahkan tempoh 6.30 petang (Kaedah 12.19/12.20/12.21) dan had harga 15% (Kaedah 12.17) terhadap edisi Bursa semasa.
Sources
- Companies Act 2016 (Act 777), Section 127 — Purchase by a company of its own shares — Laws of Malaysia / Kementerian Kewangan Malaysia
- Main Market Listing Requirements — Chapter 12: Share Buy-Backs — Bursa Malaysia Securities Berhad
- ACE Market Listing Requirements — Chapter 12: Share Buy-Backs — Bursa Malaysia Securities Berhad
Change history
| Version | Date | Change | By |
|---|---|---|---|
| 01.00 | 7 Aug 2026 | Approved and published. | — |