A significant amendment to Hong Kong's corporate law is set to reshape how listed companies manage repurchased shares, creating new opportunities for investment and capital allocation. The Companies (Amendment) Ordinance 2025, effective April 17, will allow Hong Kong-incorporated firms to retain treasury shares rather than cancel them. This change aligns Hong Kong with global standards seen in jurisdictions like Bermuda, the Cayman Islands, and China. Experts predict this move will enhance Hong Kong's attractiveness as a listing venue while increasing demand for professional services from accounting and legal firms.
The new legislation marks a shift in how corporations can utilize repurchased shares. Previously, Hong Kong-based listed companies were required to cancel nonvoting shares after repurchase. Now, they have the flexibility to hold these shares for future resale or other strategic purposes. Christopher Ma, a partner at Simmons & Simmons, noted that this reform could boost the use of Hong Kong-incorporated entities as listing vehicles, driving up demand for local professional services. Only a small fraction—about 8%—of listed companies in Hong Kong were previously restricted under the old law, indicating that most companies are already positioned to benefit from this change.
Ronny Chow, a partner at Deacons, highlighted the practical benefits of holding treasury shares. Companies can now resell these shares in smaller quantities at market price, providing an alternative fundraising method compared to issuing new shares at a discount. Additionally, treasury shares can be used for employee share schemes or as part of mergers and acquisitions transactions. This added flexibility opens up new avenues for corporate finance strategies, potentially enhancing shareholder value and operational efficiency.
Claudia Yiu, also from Simmons & Simmons, pointed out that the Hong Kong Stock Exchange does not impose specific restrictions on using treasury shares for mergers and acquisitions or debt financing. This further broadens the utility of treasury shares, offering companies more tools to manage their capital structure. Beyond treasury share reforms, the bill also introduces provisions for paperless corporate communications, allowing companies to disseminate information via websites without needing individual shareholder consent, provided shareholders have given prior express consent.
The changes present both opportunities and challenges for companies. Firms should review their articles of association to ensure alignment with the new regulations and explore ways to leverage these reforms effectively. Professionals advise that issuers must familiarize themselves with the updated rules, understand associated risks, and develop compliance strategies to maximize the benefits of this legislative update.