Singapore companies will be able to buy back more of its own shares beginning Oct 1.

The Ministry of Finance (MOF) is raising the limit on the total number of a company's issued ordinary or preference shares that a company may buy back under the Companies Act from 10 per cent to 20 per cent.

While this new limit applies to all companies incorporated in Singapore, companies listed on the Singapore Exchange (SGX) will continue to be subject to the existing 10 per cent cap, which is stipulated in the listing rules.

This approach is consistent with the practices in other jurisdictions where listed companies are subject to a tighter share buyback limit imposed by exchanges through their listing rules, instead of through the company law, MOF noted in a statement.

The increase in limit for the non-listed companies will enable them to have greater flexibility in buying back its shares and takes reference from the company law in other jurisdictions.

For example, the United States, Canada, Britain and Hong Kong, which do not impose share buyback limits.

Notwithstanding the increase in the limit, companies must conduct their share buyback in accordance with the requirements in the Companies Act designed to safeguard the interests of shareholders and creditors.

These include the need to obtain shareholders' approval, meet solvency test, and provide adequate disclosure to shareholders, said MOF.

Section 76B of the Companies Act allows a company to buy back its shares if the buyback is permitted by its articles and approved by shareholders.

The share buyback limit is based on the period between consecutive annual general meetings.

As part of the ongoing review of the Companies Act, MOF will be seeking public feedback on additional proposals relating to the share buyback regime in the coming weeks.