Own share

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A separate stock (Engl. Treasury stock or treasury share ) is a share that after a share buyback owned by the issuing company is in and its financial statements as treasury stock can be found again.

Situation in Germany

In Germany, the acquisition of own shares is only permitted under one of the conditions set out in Section 71 (1) AktG .

The possibility of acquiring own shares arose in Germany with the stock corporation law reform of 1884. With this, the prohibition that had been in force since 1870, with personal liability of the supervisory board members in the event of a violation, was softened and converted into a target provision (Art. 215d ADHGB ). This could easily be bypassed and was eventually ignored. This target provision was adopted in the HGB in 1897 as §§ 226 and 227 HGB. This lax regulation sometimes even resulted in shares being sold to banking consortia and these were then contractually obliged to exercise the associated voting rights as specified by the board of directors. With these so-called administrative shares, the ownership rights of the other shareholders were nullified. After the bankruptcy of Nordwolle AG and, as a result, the collapse of the Darmstädter und Nationalbank in 1931, stock corporation law was tightened again. The Darmstädter und Nationalbank had more than half of the share capital in its own shares, which immediately became worthless. The remaining share capital could then no longer cover the losses. With the amendment to stock corporation law of 1931, the acquisition of own shares was again forbidden, with three exceptional cases, in order to prevent serious damage, in the case of a purchasing commission and to withdraw the shares. In addition, an upper limit for the acquisition of a maximum of 10% of all shares has been introduced for exceptional cases. With the spin-off of the regulations on stock corporations in 1937 into the newly created AktG, Article 65 AktG (1937) added the exception to the acquisition of own shares free of charge. In 1959, the exception rule for acquisition for issue as employee shares followed and the regulations in Section 71 of the AktG were shifted. Two further exceptions followed in 1965, for compensation for shareholders and as part of universal succession.

With the Second EEC Directive (Capital Directive) of 1976, a uniform European framework for the acquisition of own shares was to be created. This was partially implemented on May 1, 1998 with the law on control and transparency in the corporate sector (KonTraG). The exceptions have been expanded to include an eighth point, which means that own shares can now be acquired without any particular reason. However, trading in own shares remains prohibited. The company's own shares were still shown under current assets with the associated reserve on the liabilities side, but could now also be made as an adjustment item to equity. Another step towards harmonization with European law followed with the law to modernize accounting law (BilMoG) . This implements the 8th EU directive, the final audit directive . According to Section 272 (1a) of the German Commercial Code (HGB) , treasury shares are now only to be recognized as a correction item to equity.

If a company holds its own shares, these shares do not give rise to any rights in accordance with Section 71b AktG . Accordingly, there are no dividend entitlements, no subscription rights when new shares are issued and no voting rights. The majority of votes is thus achieved for more than 50% of all shares not owned by the company.

Situation in Austria

According to Section 65 AktG , Austrian companies are generally prohibited from purchasing their own shares. However, various exceptions apply to this, which are listed in Section 65 (1) AktG.

A regulation for the acquisition of own shares first came into force in 1938 with the introduction of the German Stock Corporation Act in Austria. The German Stock Corporation Act was "australian" in 1965, which essentially meant a linguistic revision, but almost no change in content. In 1996, extensive adjustments followed with the Company Law Amendment Act. So was u. a. the EU Capital Directive adopted into Austrian law. This extended the exceptions to the acquisition of own shares, to the issue as employee shares, to the compensation of shareholders and within the framework of universal succession. The German Stock Corporation Act was also used as a guide. With the Accounting Amendment Act 2014 (RÄG 2014), there was again an adjustment to European law, especially the implementation of the auditing directive. According to this, in accordance with Section 229 (1a) of the Austrian Commercial Code (UGB), the portfolio of treasury shares must now be shown as a negative position in relation to equity.

According to Section 65 (2) AktG, a company may not acquire more than 10% of the company's shares. According to Section 65 (5) AktG, all rights associated with a share, such as voting or subscription rights, are invalid.

Situation in Switzerland

With the revision of company law in 1992, the prohibition on acquiring own shares in Art. 659 OR was lifted with effect from July 1, 1992 . Since then, the purchase of own shares has been permitted up to 10% of all shares issued, in the case of registered shares even up to 20% if the portion exceeding 10% is sold or withdrawn within two years. In addition, the value must not exceed the free reserves. There are no other restrictions, as in Germany and Austria. Another change followed in 2013, but only in the disclosure of own shares. These are now no longer included in the current assets as assets, but rather as a minus item to equity in accordance with Art. 959a OR .

According to Art. 659a OR, all rights associated with the shares, such as voting or subscription rights, are suspended.

Accounting

The disclosure in the balance sheet was standardized with the BilMoG 2009 in Germany, the RÄG 2014 in Austria and Switzerland in parts with the revision of the 2013 accounting law. The acquisition of own shares represents a capital reduction and is partly a correction to the original issue of the shares. For this reason, the capitalization of own shares in current assets was canceled and replaced by the disclosure as a negative item in equity. The disclosure has thus been aligned with the international accounting regulations in IAS 32.33.

Situation in Germany and Austria

Shares in a stock corporation are not accounted for using one, but two items in the balance sheet. A distinction is made between the nominal value and the issue price of a share. The par value is the basic value of a share. This is indicated on the share and represents the stake in a company and thus also in voting rights, subscription rights, etc. This is no different for no- par shares , as they indicate a fixed proportion of the share capital. The sum of all nominal values ​​is shown in the balance sheet under share capital or share capital. The issue price is determined by supply and demand, for example on the stock exchange. The difference to the nominal value across all shares is shown in the balance sheet as capital reserve or capital reserve.

If a company now purchases its own shares, the nominal value of the own shares must be shown as a negative position in relation to the share capital. The difference between the purchase price and the nominal value can be found in a free reserve , i.e. a reserve that is not subject to a distribution block. This is to prevent the purchase of own shares from circumventing distribution blocks. For this reason, the difference between the purchase price and the nominal value cannot be shown as a negative position in relation to the capital reserves, but must be shown as a negative position in relation to the revenue reserves.

Situation in Switzerland

With the revision of accounting law in 2013, a new item for own shares was added to the balance sheet. According to Art. 959a OR, these are now to be shown as an independent negative position in equity. The total value is shown. If these shares are resold, the profit or loss from the resale is not posted in the income statement, but directly within the liabilities in equity.

Tax consequences for own shares

This article or paragraph describes the situation in Switzerland . Help us to describe the situation in other countries.

- Art. 20 para. 1 let. C DG, Art. 20 para. 1 bis DBG, Art. 20 para. 3 DBG - Art. 7 para. 1 StHG, Art 7 para. 1bis StHG, Art. 7b StHG - Art. 4a VStG, Art. 5 para. 1bis VStG , Art. 12 para. 1bis VStg Art. 16 VStG, Art. 24a VStV - FTA, circular No. 5

It is also possible in Switzerland for a company to hold its own shares. There is also a maximum quota of 10%, which must be specifically shown in the balance sheet.

Buyback of own shares for the purpose of capital reduction

  • Buyback from private individuals: income tax on the difference between the sales price and the nominal value (Art. 20 Para. 1bis DBG, 60%). Withholding tax for companies: Withholding tax on the difference between the sales price and the nominal value (Art. 4a Paragraph 1 and Art. 12 Paragraph 1 VStG). The notification procedure cannot be used, the withholding tax must be passed on (Art. 14 VStG).
  • Buyback of companies: Profit tax on the difference between the sales price minus the profit tax value (book value principle) is taxable investment income in the form of a liquidation dividend. Participation deduction possible if participation> 20%. Withholding tax for the company on the difference between the sales price and the nominal value (Art. 4a Paragraph 1 and Art. 12 Paragraph 1 VStG, Art. 4 Paragraph 1 Letter b VStG and Art. 20 Paragraph 1 VStV). The notification procedure cannot be used, withholding tax must be passed on (Art. 14 VStG).

Resale of own shares within 6 years

  • Buyback from private individuals: Income tax: no tax consequences, capital gains achieved are finally tax-free (Art. 16 Para. 3 DBG). Company profit tax: taxable capital gain based on the difference between the repurchase price of own shares and the resale price. Withholding tax at the company: no tax consequences, as sold within 6 years.
  • Buyback of companies: Profit tax: no tax consequences, profit tax has already been paid on buyback. Company profit tax: taxable capital gain based on the difference between the repurchase price of the own share and the resale price. Withholding tax at the company: no tax consequences, as sold within 6 years.

No resale of own shares within 6 years

  • Buyback from private individuals: income tax retrospectively on tax-free capital gains (nominal value principle; Art. 16 Para. 3 DBG) due to the partial liquidation (Art. 20 Para. 1bis DBG). Company profit tax: no tax consequences. In the tax balance sheet, the company's own shares are fully derecognised at the expense of the relevant capital: decrease in taxable capital by acceptance of AK, decrease in premium reserves and decrease in profit carried forward. Withholding tax at the company (Art. 4a Para. 2 VStG). The notification procedure is not possible because the requirement according to Art. 24a VStV is not met. Passed on to private individuals.
  • Buyback of companies: profit tax, no participation deduction, if the requirement of Art. 70 Para. 4 DBG is not fulfilled, the sold quota is <20%. Income tax at the company, no tax consequences, the shares are accounted for unchanged, in the tax balance, however, the own shares are fully booked at the expense of the relevant capital: decrease in taxable capital through acceptance of AK, decrease of premium reserves and decrease of profit carried forward. Withholding tax at the company (Art. 4a Para. 2 VStG). Notification procedure is possible because the requirement according to Art. 24a VStV is fulfilled.

Buyback of own shares for the purpose of issuing employee shares

Company: If own shares are bought back for the purpose of issuing employee shares, there is no direct partial liquidation. In this case, the deadline for the transfer of shares is 12 years (Art. 4a Para. 3 VStG). The difference between the repurchase price minus the sale price is to be booked as personnel expenses, which are also subject to social security contributions.

Employees: The monetary benefit must be declared on the wage statement. The difference between market value and face value is subject to income tax and social security contributions.

Reasons for holding own shares

  • Many companies buy and sell their own shares as part of price maintenance . In this way, unfavorable peaks can be balanced up and down by using your own stock of shares.
  • A company's free liquidity should be invested as profitably as possible. Assuming a company believes in itself, this investment is a great way to increase the return on cash .
  • Since no dividend is usually paid on own shares , holding own shares is a good way of increasing earnings per share while keeping the total dividend volume constant.
  • Holding and trading in own shares to take advantage of a possible knowledge advantage is very promising. However, since this is insider trading , this type of proprietary stock trading is illegal.
  • In the event that the performance-based remuneration of members of the management board depends on the performance of the share, the price maintenance aspect of the share buyback can be used by them to increase their income. This can be seen as insider trading and also as a possibility of self-enrichment by members of the management at the expense of the stock corporation. This possibility is criticized by Robert B. Reich in his book "Save Capitalism" as a mistake.

The Deutsche Aktieninstitut (DAI) determined in 1999 that the most important reasons for German companies to acquire their own shares are to use their own shares as an acquisition currency, to distribute excess liquidity and to optimize the capital structure.

Reasons against holding your own shares

  • Share capital is an important part of the equity that covers the company's liabilities. If a company ties up liquid funds in its own shares, these are no longer available to cover debts. If a company that holds a large number of its own shares goes bankrupt , these shares can no longer be liquefied to cover debts.
  • As a consequence of this, the following applies:
    • Treasury shares must be shown separately in the balance sheet .
    • When calculating key figures , own shares must be deducted from equity.

See also

Individual evidence

  1. ↑ Henkel quarterly report - page 20 (PDF; 1.1 MB)
  2. ^ Tilmann Bezzenberger: Acquisition of own shares by the AG 2002, 1st edition, Verlag Otto Schmidt KG, ISBN 3-504-31008-1 , p. 17
  3. ↑ Alexander Kitanoff: The acquisition of own shares: share buybacks and interests of creditors, shareholders and the capital market 2009, 1st edition, Peter Lang GmbH Internationaler Verlag der Wissenschaften Frankfurt am Main, ISBN 978-3-631-58865-9 , p. 20th
  4. ^ Rudolf Ruth, Own shares and administrative shares , 1928, Carl Heymanns Verlag Berlin, p. 7 ff.
  5. ↑ Klaus J. Hopt, Herbert Wiedemann, Aktiengesetz: Großkommentar , 2008, 4th edition, De Gruyter Rechtswissenschaft Verlags-GmbH, Berlin, ISBN 978-3-89949-470-9 , p. 84
  6. ↑ Norbert Frei, Christoph Schlienkamp: Share in focus: From analysis to going public , 1999, 1st edition, Betriebswirtschaftlicher Verlag Dr. Th. Gabler GmbH, Wiesbaden, ISBN 978-3-322-87059-9 , p. 234
  7. ↑ Edmund Heinen: Handelsbalanzen , 1968, 4th edition, Springer Fachmedien Wiesbaden, ISBN 978-3-663-12609-6 , p. 180
  8. ↑ Hartmut Bieg, Heinz Kußmaul, Gerd Waschbusch: External accounting , 2012, 6th edition, Oldenbourg Wissenschaftsverlag Munich, ISBN 978-3-486-71396-1 , p. 128 ff.
  9. ↑ Tax treatment of the acquisition of own shares . Letter on the website of the Federal Ministry of Finance. Retrieved November 8, 2015
  10. ↑ On the draft of a share buyback law ( Memento of December 17, 2015 in the Internet Archive ). PDF on the website of Brandl & Talos Rechtsanwälte GmbH. Retrieved November 23, 2015
  11. ↑ Klaus J. Hopt (Ed.) Et al .: Aktiengesetz , 2007, 4th edition, De Gruyter Rechtswissenschaft Verlags-GmbH, Berlin, ISBN 978-3-89949-465-5 , p. 210
  12. ↑ Joseph Schilling: D&O insurance and manager liability for company managers and supervisory boards , 2013, 3rd edition, Verlag Versicherungswirtschaft GmbH, Karlsruhe, ISBN 978-3-89952-669-1 , p. 15
  13. ↑ Claus Buhleier: Harmonization of accounting for long-term contract manufacturing: Perspectives for accounting in Germany and Austria , 1997, 1st edition, Gabler Verlag, Deutscher Universitätsverlag, Wiesbaden, ISBN 978-3-8244-6488-3 , p. 12
  14. ↑ Gregor Schinko: Handbook for administrative and supervisory boards in management practice: The monistic and dualistic system of the European stock corporation (SE) compared to the Austrian supervisory board , 2009, 1st edition, Facultas Verlags- und Buchhandels AG Vienna, ISBN 978-3 -7089-0369-9 , p. 39 ff.
  15. ↑ Federal Law Gazette No. 304/1996
  16. ↑ Stefan Papst: Overview of the changes to the Accounting Amendment Act 2014 (PDF) in Österreichische Steuerzeitung 6/2015, Art. 210, p. 164. Retrieved from the website of the University of Salzburg on November 20, 2015
  17. ↑ Accounting Amendment Act 2014 (PDF) p. 7. Retrieved from the website of the Parliament of the Republic of Austria on November 18, 2015
  18. ^ Hans Joachim Kopp: Acquisition of own shares 1996, 1st edition, Springer Fachmedien Wiesbaden ISBN 978-3-8244-6272-8 , p. 30
  19. ↑ Is the new accounting law actually tax neutral? Retrieved from www.accountingundcontrolling.ch of AKAD Business AG on November 26, 2015
  20. ↑ Posting rates for the acquisition of own shares Presentation of the booking of own shares in Germany, Austria and Switzerland on www.waldlandwelt.de. Retrieved November 23, 2015
  21. ↑ Joachim S. Tanski: Annual accounts , 2014, 3rd edition, Haufe-Lexware GmbH & Co. KG, ISBN 978-3-648-03647-1 , p. 233 ff.
  22. ↑ Draft of the accounting amendment law (RÄG 2014) (PDF) Description of the disclosure of own shares in Austria according to the RÄG 2014 on the website of Grant Thornton Unitreu GmbH, Wirtschaftsprüfungs- und Steuerberatungsgesellschaft, Vienna. Retrieved November 24, 2015
  23. ↑ Is the new accounting law actually tax neutral? Retrieved from www.accountingundcontrolling.ch of AKAD Business AG on November 26, 2015
  24. ↑ Posting rates for the acquisition of own shares Presentation of the booking of own shares in Germany, Austria and Switzerland on www.waldlandwelt.de. Retrieved November 26, 2015
  25. ↑ Accounting for own shares: In the new accounting law, description of the disclosure of own shares in Switzerland on the WEKA website. Retrieved November 26, 2015
  26. ^ Deutsches Aktieninstitut eV (DAI): The acquisition of own shares in Markus Sendel-Müller: Germany in share buybacks and efficiency of the work of the supervisory board , 2009, Hans-Böckler-Stiftung , ISBN 978-3-86593-128-3 , p. 57