The Corporate Laws (Amendment) Bill, 2026 proposes to introduce Section 233A, which would create a formal treasury share regime under the Companies Act, 2013. The proposal is a significant departure from the current absolute prohibition on a company holding its own shares, and it is intended to address legacy treasury share structures created under the pre-2013 merger regime.
The Proposed Regime
Section 233A(1) would permit a transferee company that, as a result of a compromise or arrangement, holds its own shares to retain them for a limited period. The shares would be held in treasury, and the company would be required to dispose of them within three years. The treasury shares would not carry voting rights after the expiry of the three-year period.
The Sunset Clause
Section 233A(2) provides that if the company fails to dispose of the treasury shares within the three-year period, the shares shall be cancelled and extinguished, and the cancellation shall be deemed to be a reduction of share capital. The sunset clause is designed to ensure that the company does not hold its own shares indefinitely.
The Implications
The proposed regime would affect companies that have legacy treasury share structures, including those created under the old merger law before 1 April 2014. The companies would be required to identify the treasury shares, disclose them in their financial statements, and dispose of them within the three-year period. The failure to comply would result in the cancellation of the shares.
The Bill is not yet law, and the final provisions may change. Companies with legacy treasury shares should monitor the legislative developments and plan for the transition.
Call to Action
Anuj Desai & Associates advises companies on treasury share structures and the proposed Section 233A—from the identification of legacy treasury shares to the planning for the three-year disposal period. If your company holds treasury shares, we can help you prepare for the transition.
📧 office@anujdesaiassociates.com
📞 9619456656
🌐 https://anujdesaiassociates.com
🔗 linkedin.com/in/ca-anuj-desai-122547230
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