REV BN 11: Treasury Shares
Who is likely to be affected?
1. Companies whose shares are listed on the Stock Exchange, including the Alternative Investment Market, or are listed on an equivalent European Economic Area market.
General description of the measure
2. Under The Companies (Acquisition of Own shares) (Treasury Shares) Regulations 2003, listed companies will be allowed to purchase their own shares, hold them and subsequently sell them back into the market or cancel them. Shares held in this way are called "Treasury Shares".
3. This measure deals mainly with the tax consequences of this change to company law.
Operative date
4. The Treasury Share rules and the consequential tax changes will both become effective from an appointed day.
Current law and proposed revisions
5. Under current company law companies are not permitted to hold their own shares (apart from some exceptional circumstances). Therefore, when companies purchase their own shares, they must be cancelled, and the purchase does not result in the company acquiring assets. New shares come into existence on issue.
6. The new measures propose that tax law will treat shares purchased into treasury as if they had been cancelled and shares sold out of treasury as being newly issued. While such shares are held in treasury, they will be treated as if they do not exist.
7. The measures will provide that no income tax relief will be due to individual investors on the issue by a Venture Capital Trust (VCT) of shares sold out of treasury and treated by virtue of these measures as newly issued shares.
Further advice
8. If you have any questions about this change, please contact the Public Enquiry Unit on 020 7438 6420 to 6425.
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