Treasury shares are those previously issued by the company and fully paid by subscribers but are subsequently reacquired by the issuing corporation through PDFRL (purchase, donation, forfeiture, redemption, or lawful means)

Nature of treasury shares

• they are not original shares or subscription shares
• not an asset because a corporation may not be counted as a shareholder of its own shares
• It’s a deduction from the total shareholders’ equity (it’s a shared stock but no longer in the hands of the shareholder)

Resale of treasury shares only allowed if:

1. at reasonable price
2. price is fixed by the BoD

Treasury shares not be entitled to:

1. Dividends
2. Voting rights

Treasury shares shall not be distributable as:

1. Cash or
2. Stock dividend

Status of treasury shares

Q: Is there a watering of stock if treasury shares are sold below par value? 

No, because watering of stock only contemplates the original issuance of shares.