Share buyback is the process where a company repurchases its own shares from its existing shareholders. Companies buy back their own shares for various reasons. The process of share buybacks in Kenya is regulated by the Companies Act, which generally restricts share buyback but provides exceptions where a company may be allowed to do so pursuant to its compliance with certain requirements. Some of the requirements that must be met for a share buyback to be valid include: (a) only fully paid-up shares can be repurchased; and (b) the repurchase should be financed by distributable profits or proceeds from a fresh issue of shares. Financing of the repurchase from the capital of the company is allowed but under very stringent requirements. Although provided under our laws, share buybacks are not common in Kenya. Nation Media Group is currently involved in the country’s first ever share buyback through the Nairobi Securities Exchange. It is likely that more companies will consider this option in the future.
