Treasury Shares
Published on: 9 Jul, 2025
Treasury shares are issued shares of a company that it has reacquired. This concept was introduced with the Companies (Amendment) Act 2005, effective from 30 January 2006. Prior to this, shares repurchased by a company were immediately cancelled. The current regime allows companies to hold these reacquired shares in treasury instead of automatically cancelling them.

Here’s a detailed breakdown of treasury shares:

 

  • Nature and Applicability
    • Only ordinary shares or stocks can be held as treasury shares. Preference shares cannot be held in treasury and are deemed cancelled immediately upon acquisition.
    • While a company is registered as a member for its treasury shares, it must not exercise any rights in respect of them. This includes the right to attend or vote at meetings, and for the purposes of the Companies Act, these shares are treated as having no voting rights.
    • Furthermore, no dividend may be paid or any other distribution of the company’s assets (even on winding up) may be made to the company in respect of treasury shares.
    • However, the suspension of rights does not prevent the allotment of fully paid bonus shares in respect of treasury shares, or their subdivision or consolidation, provided the total value of the treasury shares remains the same. Any such bonus shares are treated as if they were purchased by the company as treasury shares at the time they were allotted.
    • For calculations such as determining substantial shareholdings or the requisite approval percentages in schemes or contracts (e.g., a 90% majority for compulsory acquisition), treasury shares are disregarded.

 

  • Maximum Holdings
    • There is a statutory limit: the aggregate number of shares held as treasury shares must not exceed 10%of the total number of shares of the company at that time (if there is only one class of shares).
    • If the company’s share capital is divided into different classes, the aggregate number of treasury shares of any given class must not exceed 10% of the total shares in that specific class.
    • Should this limit be contravened, the company is obliged to dispose of or cancel the “excess shares”within a six-month period, or within any further period allowed by the Registrar.

 

  • Disposal and Cancellation
    • A company holding treasury shares has several options for dealing with them at any time:
      • Sell the shares for cash. “Cash” encompasses actual cash (including foreign currency), cheques, the release of a company’s liquidated liability, or an undertaking to pay cash within 90 days.
      • Transfer the shares for the purposes of any share scheme, which can include schemes for employees, directors, or other persons.
      • Transfer the shares as consideration for the acquisition of shares in or assets of another company or person.
      • Cancel the shares. The cancellation of treasury shares can be effected without adhering to the more rigorous procedures typically required for a general reduction of share capital.
      • Sell, transfer, or otherwise use the treasury shares for other purposes as may be prescribed by the Minister.
    • An exception to these disposal options exists in the event of a takeover offer where a notice for compulsory acquisition (under Section 215 of the Companies Act) has been issued; in such a scenario, the company generally cannot sell or transfer the relevant treasury shares to anyone other than the offeror.

 

  • Accounting and Disclosure
    • For financial reporting purposes, if an entity reacquires its own equity instruments (treasury shares), these instruments must be deducted from equity.
    • No gain or loss is recognised in profit or loss arising from the purchase, sale, issue, or cancellation of an entity’s own equity instruments.
    • Any consideration paid or received for treasury shares is recognised directly in equity.
    • The total amount of treasury shares held by the company must be disclosed separately either in the statement of financial position or in the notes to the financial statements.
    • Companies are also required to provide specific disclosures regarding treasury shares in their financial reports, including:
      • A monthly breakdown of purchases and resales, detailing the number of shares and prices paid/received.
      • Information on shares retained as treasury shares and those cancelled during the financial year.
      • The total number of issued shares excluding treasury shares, both at the end of the current period and the preceding financial year.
      • A statement showing all sales, transfers, disposal, cancellation, and/or use of treasury shares as at the end of the current financial period.
    • Disclosure is also necessary if the company reacquires its own equity instruments from related parties.