• Chapter 6 Chapter 6 Treasury Shares

    • 666. Treasury shares

      (1) This section applies where-
      (a) a limited company makes a purchase of its own shares in accordance with Chapter 4, and
      (b) the purchase is made-
      (i) out of distributable profits, or
      (ii) with cash under section 631(1)(b).
      (2) Where this section applies the company may-
      (a) hold the shares (or any of them), or
      (b) deal with any of them, at any time, in accordance with section 668 or 670.
      (3) Where shares are held by the company, the company must be entered in its register of members as the member holding the shares.
      (4) In these Regulations references to a company holding shares as treasury shares are to the company holding shares that-
      (a) were (or are treated as having been) purchased by it in circumstances in which this section applies, and
      (b) have been held by the company continuously since they were so purchased (or treated as purchased).

    • 667. Treasury shares: exercise of rights

      (1) This section applies where shares are held by a company as treasury shares.
      (2) The company must not exercise any right in respect of the treasury shares, and any purported exercise of such a right is void.
      This applies, in particular, to any right to attend or vote at meetings.
      (3) No dividend may be paid, and no other distribution (whether in cash or otherwise) of the company’s assets (including any distribution of assets to members on a winding up) may be made to the company, in respect of the treasury shares.
      (4) Nothing in this section prevents-
      (a) an allotment of shares as fully paid bonus shares in respect of the treasury shares, or
      (b) the payment of any amount payable on the redemption of the treasury shares (if they are redeemable shares).
      (5) Shares allotted as fully paid bonus shares in respect of the treasury shares are treated as if purchased by the company, at the time they were allotted, in circumstances in which section 666(1) (treasury shares) applied.

    • 668. Treasury shares: disposal

      (1) Where shares are held as treasury shares, the company may at any time-
      (a) sell the shares (or any of them) for a cash consideration, or
      (b) transfer the shares (or any of them) for the purposes of or pursuant to an employees’ share scheme.
      (2) In subsection 668(1)(a) “cash consideration” means-
      (a) cash received by the company, or
      (b) a cheque received by the company in good faith that the directors have no reason for suspecting will not be paid, or
      (c) a release of a liability of the company for a liquidated sum, or
      (d) an undertaking to pay cash to the company on or before a date not more than 90 days after the date on which the company agrees to sell the shares, or
      (e) payment by any other means giving rise to a present or future entitlement (of the company or a person acting on the company’s behalf) to a payment, or credit equivalent to payment, in cash.
      For this purpose “cash” includes currency other than US dollars or the currency in which the shares are denominated.
      (3) The Board may make rules which provide that particular means of payment specified in the rules are to be regarded as falling within subsection 668(2)(e).

    • 669. Treasury shares: notice of disposal

      (1) Where shares held by a company as treasury shares-
      (a) are sold, or
      (b) are transferred for the purposes of an employees’ share scheme, the company must deliver a return to-
      (i) (in the case of a company other than a restricted scope company) the Registrar, or
      (ii) (in the case of a restricted scope company) each of its members,
      not later than one month after the shares are disposed of.
      (2) The return must state with respect to shares of each class disposed of-
      (a) the number and value of the shares, and
      (b) the date on which they were disposed of.
      (3) Particulars of shares disposed of on different dates may be included in a single return.
      (4) If default is made in complying with this section a contravention of these Regulations is committed by every officer of the company who is in default.
      (5) A person who commits a contravention of this section is liable to a level 2 fine.

    • 670. Treasury shares: cancellation

      (1) Where shares are held as treasury shares, the company may at any time cancel the shares (or any of them).
      (2) If a company cancels shares held as treasury shares, the amount of the company’s share capital is reduced accordingly.
      (3) The directors may take any steps required to enable the company to cancel its shares under this section without complying with the provisions of Chapter 10 of Part 16 (reduction of share capital).

    • 671. Treasury shares: notice of cancellation

      (1) Where shares held by a company as treasury shares are cancelled, the company must deliver a return to-
      (a) (in the case of a company other than a restricted scope company) the Registrar, or
      (b) (in the case of a restricted scope company) each of its members,
      not later than one month after the shares are cancelled.
      This does not apply to shares that are cancelled forthwith on their acquisition by the company (see section 648).
      (2) The return must state with respect to shares of each class cancelled-
      (a) the number and issue price of the shares, and
      (b) the date on which they were cancelled.
      (3) Particulars of shares cancelled on different dates may be included in a single return.
      (4) The notice must be accompanied by a statement of capital.
      (5) The statement of capital must state with respect to the company’s share capital immediately following the cancellation-
      (a) the total number of shares of the company,
      (b) the aggregate issue price of those shares,
      (c) for each class of shares-
      (i) prescribed particulars of the rights attached to the shares,
      (ii) the total number of shares of that class, and
      (iii) the aggregate issue price of shares of that class, and
      (d) the amount paid up and the amount (if any) unpaid on each share.
      (6) If default is made in complying with this section, a contravention of these Regulations is committed by-
      (a) the company, and
      (b) every officer of the company who is in default.
      (7) A person who commits a contravention of this section is liable to a level 2 fine.
      (8) This section does not apply to restricted scope companies.

    • 672. Treasury shares: treatment of proceeds of sale

      (1) Where shares held as treasury shares are sold, the proceeds of sale must be dealt with in accordance with this section.
      (2) If the proceeds of sale are equal to or less than the purchase price paid by the company for the shares, the proceeds are treated for the purposes of Part 22 (distributions) as a realised profit of the company.
      (3) If the proceeds of sale exceed the purchase price paid by the company an amount equal to the purchase price paid is treated as a realised profit of the company for the purposes of that Part, and
      (4) For the purposes of this section-
      the purchase price paid by the company must be determined by the application of a weighted average price method, and
      (b) if the shares were allotted to the company as fully paid bonus shares, the purchase price paid for them is treated as nil.

    • 673. Treasury shares: offences

      (1) If a company contravenes any of the provisions of this Chapter (except section 671 (notice of cancellation)), a contravention of these Regulations is committed by-
      (a) the company, and
      (b) every officer of the company who is in default.
      (2) A person who commits a contravention of this Chapter (except section 671 (notice of cancellation)) is liable to a level 2 fine.