Shares which have been redeemed or purchased by a company are normally cancelled. However, in practice you will find that companies can, if they wish, purchase their shares out of distributable profits and hold them ‘in treasury’ instead of having to cancel them. Shares purchased out of a fresh issue of shares or out of capital cannot be held as treasury shares (and this includes shares purchased by using the De Minimis Procedure). Treasury shares can be held in treasury indefinitely, sold for cash, cancelled at any time, or transferred for the purposes of an employees’ share scheme.
Prior to 30 April 2013, only companies whose shares were quoted on the Main Market of the London Stock Exchange, AIM and other investment exchanges could hold treasury shares. This restriction has now been removed and all companies are now able to hold shares in treasury. No s.551 CA 2006 authority is required to sell shares held in treasury, but s.561 CA 2006 preemption rights apply to treasury shares as if the sale of treasury shares were an allotment of ‘equity securities’.