Cancellation of treasury shares
Cancellation of treasury shares

The following Corporate guidance note provides comprehensive and up to date legal information covering:

  • Cancellation of treasury shares
  • Dealing with treasury shares
  • Cancellation of treasury shares—key issues
  • Cancellation of treasury shares—procedure

A limited company may hold, or deal with, shares in itself, if certain conditions set out in the Companies Act 2006 (CA 2006) are met. Those shares are held in treasury and referred to as the company's treasury shares.

The treasury shares regime is set out in CA 2006, ss 724–732. If a company contravenes any of these provisions (except CA 2006, s 730, see below), an offence is committed by the company and every one of its officers in default.

A person guilty of such an offence is liable:

  1. on conviction on indictment, to an unlimited fine, or

  2. on summary conviction, to a fine not exceeding the statutory maximum (in England and Wales, this is £5,000 for offences committed before 12 March 2015 and unlimited for those committed on or after that date)

For information as to how, and why, a company may buy back its shares to hold in treasury, see Practice Note: Buying back shares into treasury.

Dealing with treasury shares

If a company does not wish to simply hold its treasury shares, it can:

  1. sell them for cash consideration (see Practice Note: Sale of treasury shares)

  2. transfer them for the purposes of, or pursuant to, an employees' share scheme (see Practice Note: Transfer of treasury shares to an employees' share scheme), or

  3. cancel them

Cancellation of treasury