What Are Treasury Shares?

Treasury stock refers to stocks that have been publicly issued, but the issuing company has reacquired shares that can be resold or cancelled through purchase, gift, or other means. Treasury stocks do not distribute dividends or carry voting rights. On the company's balance sheet, treasury shares cannot be listed as company assets, but are listed as a Shareholder's Equity in the form of a negative number. The debit indicates an increase, and the lender indicates a decrease. It belongs to the owner's equity allowance (other owners' equity accounts deduct loans and increase loans).

Treasury stock

Treasury stock refers to stocks that have been publicly issued, but the issuing company has reacquired shares that can be resold or cancelled through purchase, gift, or other means. Treasury stocks are neither allocated

Treasury shares are used to calculate the amount of shares of the company that have not been transferred or cancelled by the enterprise. Yes

Basic principles of treasury stock accounting: Business involving treasury stocks can only cause

(2) The enterprise shall set up a "treasury stock" subject, and the undergraduate account shall calculate the amount of the company's shares acquired, transferred or cancelled by the enterprise.

The main account processing of treasury shares.

The company acquires the company in order to reduce its registered capital.

Treasury stock implementation procedures

The general meeting of shareholders decides whether to implement treasury shares and the specific operation plan of treasury shares.

In order to prevent the company's operators from abusing the treasury stock system, the company should apply to the China Securities Regulatory Commission before implementing the treasury stock system. The application should include at least the following: the purpose of implementing treasury shares, the number of treasury shares, the source of treasury shares, and the Use of shares.

The China Securities Regulatory Commission will conduct strict inspections on companies that intend to implement the treasury stock system, including reviewing their declared materials, and only implement them if they meet the requirements.

(3) The company implementing the treasury stock system must disclose information on the implementation plan, method and deadline of the treasury stock. If the company purchases the company's stock from the secondary market, it must be announced in advance, and the price should be reasonable. At the same time, information about the acquisition, increase, or decrease of treasury shares must also be disclosed in a timely manner.

Treasury stock foreign system

Regarding whether the company is allowed to buy back the company's shares, the laws and regulations of different countries and regions are different.

United States: In principle, companies are allowed to repurchase stocks, and the rules on share repurchase are more relaxed.

It is very common for US companies to buy back stock. The purpose of repurchasing shares of American companies is to stabilize and increase the company's stock price, to prevent the business crisis caused by the stock price's plunge; to recover the stocks to reward the successful managers and employees. However, the state company laws of many states in the United States stipulate that the repurchase of the company's shares is legal only when the company fights for a controlling stake in order to maintain the existing operating principles and maintain the company's interests. There is a loose side and there are corresponding requirements.

Germany: In principle, companies are prohibited by law from buying and selling the company's shares, except in certain circumstances.

According to the provisions of Article 71 of the Stock Law, enterprises are permitted to purchase shares of the company within 10% of the capital under specific circumstances. The so-called specific circumstances are: (i) when major losses are avoided; (ii) when provided to employees; (iii) when the stock is cancelled based on the capital reduction resolution; (ii) when the stock is inherited, etc. Therefore, Germany has certain restrictions on the conditions for share buybacks.

Japan: The law prohibits companies from buying and selling the company's stocks in principle, in order to ensure the enrichment of capital, equality of shareholders and fair distribution of corporate control.

In Japan, an enterprise's acquisition of the company's stock is also permitted in the following cases: when it is acquired to cancel the stock; when the business is merged; when it is necessary to exercise the company's rights under the acceptance of debt settlement, etc. Among them, "stock cancellation" is rarely used due to the tedious procedures of cancellation and tax law issues. It can be seen that Japan has clear requirements for the conditions of share repurchase. This is similar to China's approach.

Regarding the repurchased shares, as a way of capital operation, the establishment of the treasury shares system has a great effect on the adjustment of the company's equity structure and the arrangement of incentive mechanisms. Regarding the implementation of the Treasury Unit, the institutional arrangements in different countries and regions are also different.

United States: The company may cancel the registration of the repurchased shares and cancel the shares, or hold the shares in inventory.

During the period when the shares are held in inventory, they are generally not eligible to receive dividends and have no voting rights. These shares can be used as bonus shares, employee share plans or at the time of acquisition, but they can no longer be sold to the public unless the shares are registered under the U.S. Securities Act of 1933 or sold under exemptions from the Act, such as It is a private placement regulated by the law, in which the placees are usually restricted in selling shares. When the company resells the relevant shares, whether it is profitable or not, it must be treated as a reserve, rather than calculated into the income statement. These shares are also excluded in the calculation of ratios per share. There are no restrictions on the number of shares a company can hold in the United States.

Germany: The Federal German Companies Act ^[2] stipulates that a company limited by shares may not subscribe for its own shares, and a subsidiary may not subscribe for shares of its parent company, except in certain circumstances.

The company can obtain its own shares in the following 6 cases: to avoid major losses; to protect the interests of certain minority shareholders; to provide shares to the employees of the company; to obtain shares free of charge; to obtain shares through mergers, the company needs to reduce its share capital and stipulate that The company's own shares must not exceed 10% of the company's total share capital, and the right to treasury shares is also restricted, that is, it has no voting rights.

Japan: Until 1994, the company held a negative attitude towards its own shares.

However, in April 1994, the "Amendment of Part of the Law on Commercial Law and the Limited Company Law" was promulgated, which relaxed the company's reasons for obtaining its own shares, and added that the company can acquire its own shares for reasons such as employee shareholding; and at the same time, to prevent To relax the disadvantages of companies obtaining their own shares to derive insider trading and manipulation of stock prices, the Japanese Securities Exchange Law has also been amended accordingly.