An on-market share buy-back exceeding the 10/12 limit allows a company to repurchase more than 10% of its shares within a rolling 12-month period, but it generally requires shareholder approval due to its potential impact on the company’s capital structure and share value.
The 10/12 limit is a rule under Australian law (specifically the Corporations Act 2001) that allows a company to repurchase up to 10% of its shares in a 12-month period without requiring shareholder approval. If a company wants to repurchase more than this limit, it must gain approval through a shareholder resolution.
Key points related to this type of buy-back include:
1. Shareholder Approval: A special resolution (typically requiring 75% approval) must be passed by shareholders.
2. ASX Notification and Documentation: For listed companies, it also requires notifying the Australian Securities Exchange (ASX) and providing full details in a notice of meeting.
3. Impact on Share Price and Control: Exceeding the limit can affect share liquidity, price, and potentially shift control, which is why regulators closely monitor it.
The main purpose of exceeding the 10/12 limit is usually to improve shareholder value, return surplus capital, or adjust the company’s capital structure. However, this must be balanced against regulatory requirements and shareholder interests.
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