The resolution of the management board to exercise an authorisation by the annual general meeting to implement a buy-back programme constitutes inside information if it has the potential to significantly affect prices.

However, resolutions by the management board and the supervisory board of the issuer to propose a share buy-back authorisation to the annual general meeting do not normally constitute inside information.¹

The actual implementation of the share buy-back resolution does not present any problems for the company because acting on the basis of one’s own plans or the mere fact of making such an acquisition are not deemed to constitute use of inside information (recital (31) of the MAR).

However, problems may arise where the general decision to buy back shares has been made but where the company, at the time of actually placing the order, is in possession of other inside information which will likely have a significant positive effect on the price. The reason is that, in this case, the company is also acting after coming into possession of that inside information and uses it within the meaning of Article 8(1) of the MAR.

When implementing the share buy-back programme, there is therefore a recommendation, before executing the transactions, to make a binding legal commitment towards the bank engaged to carry out the buy-back programme or an independent third party to acquire a predefined quantity of shares over a specified period. If the engaged institution or third party then implements the buy-back by itself and if that person can in particular decide independently about the timing of placing the orders, there is not a problem if the company comes into possession of inside information before execution, for example, of the third or fourth order. This is because the legal obligation to acquire the shares already existed before the knowledge of the inside information. This would rebut the statutory presumption of using inside information. However, this only applies if the person responsible for executing the individual orders does not him- or herself possess any relevant inside information about the shares to be acquired and the company’s obligation was established at a time when the company did not possess any inside information.

The safe harbour rules under Article 5(1) to (3) of the MAR cannot be used during the period of a delay under Article 17(4) and (5) of the MAR, even if the buy-back programme is implemented under the leadership of an independently acting credit institution, as long as the management board was in possession of the inside information at the time the credit institution was instructed (see point (c) of Article 4(1) of Commission Delegated Regulation (EU) 2016/1052). Point (b) of Article 4(2) of Commission Delegated Regulation (EU) 2016/1052 is not applicable here because this reverse exemption presupposes that the credit institution also independently decides the timing of acquisition. However, instructing the bank the issuer also determines the potential start of the acquisition period, with the result that complete independence no longer exists. The bank must therefore be instructed before coming into possession of inside information for the aforementioned reverse exemption to apply.

Companies may suspend buy-back programmes at any time. If the company decides against proceeding with the buy-back because inside information has now emerged, it must act with utmost care. Under the second sentence of Article 8(1) of the MAR, cancelling or amending an order may also constitute insider dealing. For the case of advance instructions described above, this would mean that, if the company comes into possession of inside information after the fact, early termination of the buy-back programme and hence cancellation or amendment of this order may constitute prohibited insider dealing.

In addition, if the buy-back programme is resumed, it must be ensured that there is no inside information in this case, too, that would be used for further buy-backs.

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