When a company holds shares in treasury, the shares and rights associated with them are essentially put on hold, but the company’s capital remains the same.
Treasury shares can be sold to a new investor or used when options are exercised, without the need for a new share allotment. When this happens, the rights associated with the share class will be reinstated.
Reinstating or selling treasury shares is a similar process to a stock transfer, however there are a few key differences.
Firstly, the company’s articles of association and any other documents (such as a shareholders’ agreement) will need to be checked for any additional steps that must be taken.
A directors’ resolution will also be needed to approve the transfer of shares from the treasury to the recipient, and a shareholders’ resolution may also be needed to waive pre-emption rights. A stock transfer form will be needed to effect the transfer of title to the shares. Finally, a share purchase agreement may be entered into, but it’s not legally required.
In the case of exercising options that are held over treasury shares, any directors’ and shareholders’ resolutions should have passed when the options were first granted. But please double-check to see if any authorisations are needed.
Once the transfer from the treasury to the shareholder is complete, the company will need to update its shareholder register to reflect the transfer. Share certificates will be issued to the new shareholders, and a Form SH04 (rather than an SH01 which is only needed for the issuance of new shares) will need to be filed with Companies House within 28 days of the transfer (this will be automatically filed when completing the transfer on Vestd).
Issuing shares from treasury on Vestd
In order to hold treasury shares on the Vestd platform, the company must perform a buyback to treasury. If you currently don’t have any treasury shares, please contact firstname.lastname@example.org to start a buyback to treasury.
However, the Vestd platform will recognise if you already have treasury shares, and you can confirm this by going to Share capital > Cap table where a note will say:
‘’The totals above exclude the following shares which are in treasury: <Number of shares>, <Share class>.
Assuming you have treasury shares, follow these two steps to issue them to a recipient:
1. Create a share authorisation for treasury shares
In order to create a share authorisation from ordinary shares, please follow the steps in our ‘How to create a share pool’ guide - but this time select ‘Yes’ to the selection ‘Should these shares come from treasury?’ as shown below:
We recommend that you give the share authorisation a reference such as ‘Treasury shares’ so it’s easier to find when completing step 2.
Once you have authorised the share pool, the share authorisation summary will say ‘from treasury’ which confirms that the authorisation is over treasury shares.
2. Issue treasury shares
Please follow the steps in our ‘How do I issue shares on Vestd’ guide, but this time selecting your ‘Treasury shares pool.’
When you have entered the recipient’s details and clicked ‘Save as draft,’ you will be taken to the ‘Share offer summary' page. Here you will be asked how you want to complete the stock transfer.
Please note, you can only issue treasury shares to existing shareholders on Vestd. This is because we cannot generate the stock transfer form without the new shareholder's address. If you need to issue treasury shares to a new shareholder, please contact us to add the shareholder to Vestd, then you can add their address.
If you’re uploading an existing stock transfer form or selecting one from company documents, the stock transfer will be complete after clicking Generate the stock transfer.
If you need to generate a new document, you will need to select a director who can sign the stock transfer form on the company’s behalf. Once you click Start issue and generate stock transfer, the chosen director will be emailed to sign the form and complete the transfer.
Whichever selection is chosen here, once complete we’ll automatically send the Form SH04 to Companies House.
Our team, content and app can help you make informed decisions. However, any guidance and support should not be considered as 'legal, tax or financial advice.'