In response to the Thai stock index’s decline and market volatility, Thailand’s Department of Business Development is proposing an amendment to the country’s treasury stock rules to ease the requirements for both the implementation and the disposal of shares, as they see this as a timely opportunity to optimize the use of treasury stock as a tool to support share prices and prevent them from falling below their fundamental value.
The rules governing treasury stock for public companies are set out in the Public Limited Companies Act B.E. 2535 (1992) (PLCA), its accompanying ministerial regulation, and the relevant rules issued by the Stock Exchange of Thailand (SET). The law permits share repurchases in two circumstances: (1) to buy back shares from dissenting shareholders following an amendment to the articles of association affecting voting or dividend rights, and (2) for financial management purposes when the company has retained earnings and excess liquidity—this second scenario is more common in the market. To satisfy the excess liquidity requirement, the company must primarily demonstrate the ability to meet its debt obligations within six months, have sufficient retained earnings, and ensure that the treasury stock implementation does not breach the SET’s free-float requirement.
The SET rules prescribe that the repurchase price must not exceed 115% of the five-day average closing price at the time of repurchase, and the disposal price must not be lower than 85% of this average closing price at the time of disposal. As for the timing, treasury shares must be held for at least three months and sold within three years; otherwise, the company must proceed with a capital reduction. There is also a six-month waiting period following the finishing or canceling of a previous share buyback before a company can start a new one.
The proposed amendment will ease these timings as follows:
- A new share buyback program can commence immediately after the prior program ends, without the current six-month waiting period.
- The resale period can be extended by up to three additional years beyond the current three-year limit, subject to shareholder approval and market prices remaining at or below the average buyback price. This should help ease concerns regarding disposal and avoid a capital reduction if prices do not recover.
The public hearing on the amendment concluded on April 10, 2025, and the market now awaits the official outcome and implementation of the proposed amendments. Listed companies that have already implemented share buybacks will likely be able to amend the disposal period to be in line with the new regulation following certain disclosure requirements.
