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Laws and decision regulating treasury shares

أسهم الخزينة - Treasury shares

Treasury shares are shares that the issuing company repurchases from the market through the stock exchange and has no right of distributions or right to vote during the period of ownership of the issuing company.

Treasury shares are often executed in order to reduce the number of free shares in the market and increase their prices and thus increase the profitability of shares as well as increasing the percentage of dividends, pointing out that many shares are rising in price as a result of the decrease in the number of shares offered for trading.

In all conditions the above-mentioned shares have no right to vote in the general assembly, obtain profits, shall be deducted from the total shares of the company when calculating attendance and the required quorum for voting in the assembly until they are sold.

As a result, the share prices of many companies that purchased treasury shares do not reflect the actual performance of these companies.

On the other hand, these shares are sometimes bought to reward the employees of the company, especially the managers, so it rewards them by making them the owners of the company, which will motivate them to do a double effort to maintain the level of the company and upgrade it.

Examples of companies that have already purchased their own treasury shares include El Sewedy Electric, Madinet Nasr for Housing and Development, and Raya for Call Center Service.

Dealing in treasury shares

The company has the right to deal with the shares within one year from the date of buying them as follows:

The company can deal in treasury shares through a motivation and reward system for its employees, managers, or to distribute them to shareholders as free shares.

In Case of buying the shares by a sister company or under its control it shall be considered as treasury shares and subject to the provisions of the treasury shares.

Regulating rules of treasury shares according to the Law, regulations and decisions

The company shall notify the stock exchange by its desire to purchase some of its shares (treasury stocks) three working days before the purchase date unless the authority allows not to adhere with the specified period.

The notification shall include the justifications, type, number of dealt shares and the price of the shares and also include the brokerage company, the fund for the purchase and the performance of the company, provided that the Board of Directors meeting minutes for the purchasing shares must be attached to the following:

  1. It should be local shares.
  2. The company shall not keep the shares not less than three months and do not exceed more than one year. Otherwise, the company must reduce its capital by the amount of the nominal value of those shares, and by following the procedures prescribed for that in accordance with the law no. 159 of 1981 and its executive regulation and Law no. 95 of 1992 and its executive regulation.
  3. The treasury shares shall not exceed 10% of the listed shares of the company.
  4. The purchase and sale process of the treasury shares must be according to stock exchange rules and controls which guarantee the equality between the parties and the stability of the transactions, after the issuance of the Board of Director’s decision.

In all cases the company must disclose to the stock exchange at the end of the day on what the company has been selling or purchasing from the treasury shares, and the it shall be published on the trading screen and on the website.

Furthermore, the approval from the General Assembly must be obtained on the decision of purchasing the treasury shares if the purchasing increase the shareholders voting rights and the persons associated with them, without voting of the shareholders and the associated persons on the decision in the General Assembly.

In case the company fails to decrease its capital with the amount of its shares, GAFI will take the following procedures:

GAFI will warn the company with a letter to take the required procedures to decrease its capital after one year from purchasing them within 30 days from receiving the warning.

In case a month has passed, and the company was not held an extraordinary general meeting to decrease the capital with the amount of treasury shares or reject the decision to decrease the capital for any reason, the decision shall be taken by the authority to decrease the capital with one month from the end of the above-mentioned period.

Notify the commercial register by GAFI’s decision of decreasing the capital with the amount of treasury shares of the Authority decision.

Regulating rules of decreasing the capital restricted by the treasury shares according to Egyptian Law

The company shall immediately and before start the trading session of the next day notify the stock exchange of the Extraordinary general assembly’s decision of decreasing the capital.

The competent authority shall review the disclosure report regarding the decisions of the EGM that has been approved by the stock exchange and ratified by the competent authority.

There are no changes in the limits of the prices of the treasury shares of the companies that executed them.

Laws and decision regulating treasury shares

  • Listing and deletion regulations issued by The Financial Regulatory Authority on 31/8/2022.
  • Regulatory book no. 12 of 2018 issued by The Financial Regulatory Authority.
  • Article 48 of Law no. 159 of 1981.
  • Executive procedures of listing and deletion regulations of securities issued by the stock exchange board on 11/2/2014.