Cancellation of treasury shares
Cancellation of treasury shares

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

  • Cancellation of treasury shares
  • Dealing with treasury shares
  • Cancellation of treasury shares—procedure
  • Cancellation of treasury shares—key issues
  • Authorisation from the FCA
  • Stamp tax treatment of a cancellation of treasury shares
  • The register of members and share certificates
  • Companies House filings
  • Accounting impact
  • Disclosure in accounts
  • More...

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.

In addition to the provisions of CA 2006, there are other rules and guidelines that are relevant to a listed company or an AIM company. In particular, a listed company must have regard to the Listing Rules (LRs) and the Disclosure Guidance and Transparency Rules (DTRs). An AIM company must have regard to the AIM Rules for Companies (AIM Rules), but these do not specifically refer to share buybacks, so AIM Regulation has confirmed that compliance by an AIM company with the LRs in relation to share buybacks would represent best practice in most circumstances. An AIM company is also subject to DTR 5. In addition, both types of company may follow institutional investor guidance.

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

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