Companies Act 2006

Chapter 6 U.K. Treasury shares

[F1 724 Treasury shares U.K.

(1) This section applies where–

(a) a limited company makes a purchase of its own shares in accordance with Chapter 4, and

[F2 (b) the purchase is made out of distributable profits.]

F3 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) 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 727 or 729.

(4) Where shares are held by the company, the company must be entered in its register of members [F4 [F5 (or, as the case may be, the company's name must be delivered to the registrar under Chapter 2A of Part 8)]] as the member holding the shares.

(5) In the Companies Acts 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).]

Textual Amendments

F1 S. 724(1) substituted (30.4.2013) by The Companies Act 2006 (Amendment of Part 18) Regulations 2013 (S.I. 2013/999), reg. 14(2)

F2 S. 724(1)(b) substituted (6.4.2015) by The Companies Act 2006 (Amendment of Part 18) Regulations 2015 (S.I. 2015/532), regs. 1(2), 7

F3 S. 724(2) omitted (30.4.2013) by virtue of The Companies Act 2006 (Amendment of Part 18) Regulations 2013 (S.I. 2013/999), reg. 14(3)

F4 Words in s. 724(4) omitted (26.10.2023 but only so far as it confers a power to make regulations or relates to the exercise of the power, otherwise prosp.) by virtue of Economic Crime and Corporate Transparency Act 2023 (c. 56), s. 219(1)(2)(b), Sch. 1 para. 14

F5 Words in s. 724(4) inserted (30.6.2016) by Small Business, Enterprise and Employment Act 2015 (c. 26), s. 164(1), Sch. 5 para. 25; S.I. 2016/321, reg. 6(c)

725 Treasury shares: maximum holdings U.K.

F6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F6 S. 725 repealed (1.10.2009) by The Companies (Share Capital and Acquisition by Company of its Own Shares) Regulations 2009 (S.I. 2009/2022), reg. 5(1) (with reg. 5(2)(3))

726 Treasury shares: exercise of rights U.K.

(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 724(1) (treasury shares) applied.

727 Treasury shares: disposal U.K.

(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 (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 foreign currency.

(3) The Secretary of State may by order provide that particular means of payment specified in the order are to be regarded as falling within subsection (2)(e).

(4) If the company receives a notice under section 979 (takeover offers: right of offeror to buy out minority shareholders) that a person desires to acquire shares held by the company as treasury shares, the company must not sell or transfer the shares to which the notice relates except to that person.

(5) An order under this section is subject to negative resolution procedure.

Commencement Information

I1 S. 727 wholly in force at 1.10.2009; s. 727 not in force at Royal Assent, see s. 1300; s. 727 in force for specified purposes at 20.1.2007 by S.I. 2006/3428, art. 3(3) (subject to art. 5, Sch. 1 and with arts. 6, 8, Sch. 5); s. 727 otherwise in force at 1.10.2009 by S.I. 2008/2860, art. 3(l) (with arts. 5, 7, 8, Sch. 2) (as amended by S.I. 2009/1802, art. 18)

728 Treasury shares: notice of disposal U.K.

(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 the registrar not later than 28 days after the shares are disposed of.

(2) The return must state with respect to shares of each class disposed of—

(a) the number and nominal 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 an offence is committed by every officer of the company who is in default.

(5) A person guilty of an offence under this section is liable—

(a) on conviction on indictment, to a fine;

(b) on summary conviction, to a fine not exceeding the statutory maximum and, for continued contravention, a daily default fine not exceeding [F7 one-tenth of the statutory maximum][F7 one-tenth of the greater of £5,000 or the amount corresponding to level 4 on the standard scale for summary offences].

Textual Amendments

F7 Words in s. 728(5)(b) substituted (E.W.) (12.3.2015) by The Legal Aid, Sentencing and Punishment of Offenders Act 2012 (Fines on Summary Conviction) Regulations 2015 (S.I. 2015/664), reg. 1(1), Sch. 3 para. 9(18) (with reg. 5(1))

729 Treasury shares: cancellation U.K.

(1) Where shares are held as treasury shares, the company may at any time cancel the shares (or any of them).

(2) F8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) F8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) If company cancels shares held as treasury shares, the amount of the company's share capital is reduced accordingly by the nominal amount of the shares cancelled.

(5) 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 17 (reduction of share capital).

Textual Amendments

F8 S. 729(2)(3) omitted (30.4.2013) by virtue of The Companies Act 2006 (Amendment of Part 18) Regulations 2013 (S.I. 2013/999), reg. 15

730 Treasury shares: notice of cancellation U.K.

(1) Where shares held by a company as treasury shares are cancelled, the company must deliver a return to the registrar not later than 28 days after the shares are cancelled.

This does not apply to shares that are cancelled forthwith on their acquisition by the company (see section 708).

(2) The return must state with respect to shares of each class cancelled—

(a) the number and nominal value 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 nominal value of those shares,

[F9 (ba) the aggregate amount (if any) unpaid on those shares (whether on account of their nominal value or by way of premium), and]

(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 nominal value of shares of that class, F10 ...

F10 (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) If default is made in complying with this section, an offence is committed by—

(a) the company, and

(b) every officer of the company who is in default.

(7) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.

Textual Amendments

F9 S. 730(5)(ba) inserted (30.6.2016) by Small Business, Enterprise and Employment Act 2015 (c. 26), s. 164(1), Sch. 6 para. 16(a); S.I. 2016/321, reg. 6(e)

F10 S. 730(5)(d) and word omitted (30.6.2016) by virtue of Small Business, Enterprise and Employment Act 2015 (c. 26), s. 164(1), Sch. 6 para. 16(b); S.I. 2016/321, reg. 6(e)

Commencement Information

I2 S. 730 wholly in force at 1.10.2009; s. 730 not in force at Royal Assent, see s. 1300; s. 730 in force for specified purposes at 20.1.2007 by S.I. 2006/3428, art. 3(3) (subject to art. 5, Sch. 1 and with arts. 6, 8, Sch. 5); s. 730 otherwise in force at 1.10.2009 by S.I. 2008/2860, art. 3(l) (with arts. 5, 7, 8, Sch. 2) (as amended by S.I. 2009/1802, art. 18)

731 Treasury shares: treatment of proceeds of sale U.K.

(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 23 (distributions) as a realised profit of the company.

(3) If the proceeds of sale exceed the purchase price paid by the company—

(a) an amount equal to the purchase price paid is treated as a realised profit of the company for the purposes of that Part, and

(b) the excess must be transferred to the company's share premium account.

(4) For the purposes of this section—

(a) 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.

732 Treasury shares: offences U.K.

(1) If a company contravenes any of the provisions of this Chapter (except section 730 (notice of cancellation)), an offence is committed by—

(a) the company, and

(b) every officer of the company who is in default.

(2) A person guilty of an offence under this section is liable—

(a) on conviction on indictment, to a fine;

(b) on summary conviction to a fine not exceeding the statutory maximum.