What is a share buyback (treasury stock)? Taiwan's 3 purposes, deadlines & rules
Last updated: 2026-08-20
Taiwan-listed companies may buy back their own shares (treasury stock) for only three legal purposes: transferring shares to employees, supporting convertible-bond/warrant conversion, or protecting company credit and shareholder interests (price stabilization). The buyback is capped at 10% of issued shares, funded only from retained earnings plus realized capital reserves. Price-stabilization buybacks must be cancelled within 6 months; employee-transfer shares must be transferred within 5 years or are deemed unissued. Not investment advice.
The three legal purposes — nothing else qualifies
Under Article 28-2 of Taiwan's Securities and Exchange Act (證券交易法), a listed company may only repurchase its own shares for: (1) transferring shares to employees, (2) supporting the conversion of convertible bonds or warrant-attached bonds it has issued, or (3) protecting company credit and shareholder interests — the price-stabilization purpose most investors mean when they say "buyback." A buyback announced for any other reason is not legally permitted.
How much can a company buy back?
The number of shares repurchased cannot exceed 10% of the company's total issued shares. The total amount spent is also capped — it cannot exceed the sum of the company's retained earnings (undistributed earnings plus legal and special reserves) and its realized capital reserves. A company cannot fund a buyback from restricted or unrealized reserves.
Execution timeline: 2 days to disclose, 2 months to finish
Once the board resolves to buy back shares, the company must publicly disclose the resolution and file with the Financial Supervisory Commission within 2 days. It then has 2 months from the filing date to complete execution, and must report the actual execution result within 5 days after the 2-month period ends or execution completes — whichever comes first. If the buyback isn't finished within 2 months and the company still wants to continue, it must pass a new board resolution.
Cancel within 6 months, or transfer within 5 years — the deadlines differ by purpose
The deadline attached to a buyback depends on why it was done. Shares bought back for price stabilization (purpose 3) must be formally cancelled within 6 months of the buyback date, permanently reducing the share count. Shares bought back for employee transfer (purpose 1) must be transferred to employees within 5 years; any portion not transferred in time is deemed unissued and must go through a capital-reduction registration. Shares held for convertible-bond conversion (purpose 2) are kept until converted or the bonds mature. Don't assume every buyback ends the same way.
Insiders can't sell during the buyback window
While a company is executing a buyback, its directors, supervisors, managers, and any shareholder holding more than 10% of shares — along with their spouses, minor children, and any nominee accounts held in someone else's name — are barred from selling their own shares in the same company. This prevents insiders from profiting off the buyback's likely price support while the company itself is a net buyer.
FAQ
What is a share buyback, in one sentence?
It's a listed company using its own funds to buy back its own shares from the open market, for one of three legally defined purposes — employee transfer, convertible-bond conversion, or price stabilization.
Is there a limit on how much a company can buy back?
Yes — up to 10% of total issued shares, and the total spend cannot exceed retained earnings plus realized capital reserves.
Does the company always have to cancel the shares afterward?
No — only if the buyback was for price stabilization (must cancel within 6 months). Shares bought for employee transfer instead have 5 years to be transferred, and shares held for convertible-bond conversion are kept until conversion or maturity.
Can company insiders sell their own shares during a buyback?
No. Directors, supervisors, managers, and 10%+ shareholders — plus their spouses, minor children, and nominee accounts — are barred from selling during the company's buyback execution period.
How long does a buyback take to complete?
2 months from the filing date. If not finished in time and the company wants to continue, it must pass a new board resolution and file again.
Does a buyback mean the stock is undervalued?
Not necessarily. A buyback signals that management is willing to spend company cash on its own shares, which markets often read as a confidence signal — but the legal purpose (e.g. funding employee compensation, or preparing for bond conversion) doesn't always mean "the stock is cheap." This page explains the mechanism, not a valuation call. Not investment advice.
Not investment advice. This is a factual summary of Taiwan's share-buyback rules (證券交易法第28-2條、上市上櫃公司買回本公司股份辦法), not a recommendation to buy, sell, or interpret any specific company's buyback. Source: Taiwan's National Laws & Regulations Database (法務部全國法規資料庫).