What is treasury stock, and how can it benefit companies? What is treasury stock, and how can it benefit companies?

What’s treasury stock?

If your company is considering an employee share scheme or paying your shareholders a dividend, you may have come across the term ‘treasury stock’. 

The term treasury stock (also known as treasury shares or reacquired stock) refers to when a company buys back outstanding stock from shareholders. 

For example, this can occur when employees leave a company and wish to sell their employee shares. The company repurchases these shares and holds them under the company name until a later date when these shares are either transferred to new employees or cancelled.

How’s treasury stock different from other shares?

Unlike other shares in a business, treasury stock isn’t eligible for dividends and has no shareholder voting rights. Treasury stock is also not included in employee share scheme calculations. 

If a company decides to do so, treasury stock can be retired, which means that the shares are permanently cancelled, no longer listed as treasury stock, and cannot be reissued at a later date. 

Alternatively, a company may decide to re-issue treasury shares through an employee share scheme compensation or a capital raise.

Compliance and regulations

When a company buys treasury stock, it needs to be carried out in a way that’s compliant with the Companies Act 1993. This means that the amount of treasury stock acquired by the company, when aggregated with shares of the same class held by the company, doesn’t exceed 5% of the shares of that class previously issued by the company. Previously cancelled treasury stock isn’t included in this percentage.

Companies are also required to maintain detailed records of treasury stock transactions. 

These must include details on: 

• the number of shares repurchased by the company

• the price paid

• how the buybacks were financed.

The company must have sufficient retained earnings to be able to finance the treasury stock.

How Sharesies can help

Since treasury stock isn’t eligible for dividend repayments or voting rights, it’s crucial that a company keeps track of the number of shares that are treasury stock. 

Traditionally this was done by manually entering treasury stock into a spreadsheet. However, this approach is time-consuming and leaves room for human error—such as forgetting to add treasury stock or creating duplicates.

Sharesies Private can save companies valuable time by automatically excluding treasury stock from the overall share count and dividend payments.

Sign up for a guided tour, and see how we can help your company.