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Chapter 8
Treasury shares
Definition
These are created when a company purchases its own shares from distributable
profits. The shares do not have to be cancelled. Up to 10% ofthe shares can be held
'in treasury' which means they can be re-issued without the usual formalities.
Previously treasury shares could only be created by public companies but since 30
April 2013 they can be created by private companies as well.
General rule
Shares which are purchased by a company must be cancelled and the amount of the
company's share capital account reduced by the nominal value of the cancelled
shares.
Exception
Under S724 CA 2006, companies can buy, hold and resell their shares.
The shares must be purchased from distributable profits and the company can cancel
or sell them at any time.
Under S726 CA 2006, the shares will not give the company any voting rights in
respect of those shares. In addition, no dividend or other form of distribution can be
made in respect of them.
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