India is finally moving toward recognising "treasury-share-like structures". Most people are celebrating. But the real story isn’t what’s being introduced. It’s what may quietly have to be unwound. First, the basics.

What are Treasury Shares?

Shares a company buys back and keeps, instead of cancelling. Globally, companies use them to reissue later, fund ESOPs or manage capital more flexibly.

Why didn't India allow this?

Buybacks are allowed (Section 68) under the Companies Act 2013. But shares must be extinguished within 7 days, and a capital redemption reserve must be created (Section 69).

In short, you can buy back your shares – but you can’t keep them.

So what existed instead?

Over time, certain legacy structures emerged, especially through old schemes of merger and demerger wherein companies ended up holding shares in themselves, sometimes directly, sometimes through trusts or layered entities.

Not designed as treasury shares. But in effect, not very different either.

Now comes the part most people are missing.

The proposed Section 233A doesn’t just introduce change. It forces a clean-up.

If, due to a pre-2013 scheme, a company holds its own shares (even via a trust / subsidiary / associate):

- It must dispose of them within 3 years.

- Or they will be compulsorily cancelled and extinguished.

- With continuing penalties for non-compliance.

Why this is bigger than it looks

3 years sounds comfortable. It isn’t as unwinding; these structures may involve regulatory thresholds being triggered, multiple layers of approvals, tax consequences at each step, coordination across entities and trustees.

This is not a back-office exercise. It’s a strategic restructuring

What about ESOP trusts?

ESOP trusts (under SEBI Share-Based Employee Benefits Regulations, 2021) are legitimate employee benefit vehicles. They can hold shares and can vote. Trustees have fiduciary duties. Section 233A is not aimed at typical ESOP structures. It may become relevant only where a trust is effectively holding shares on behalf of the company, arising from older schemes.

That distinction will matter.

This isn’t just about enabling treasury shares. It’s about forcing alignment with the post-2013 framework.

If your structure involves: - legacy scheme arrangements - indirect self-holdings - trust-held shares linked to historic restructurings

You don’t have a “wait and watch” situation.

You have a “start evaluating now” situation. Because once the law is notified, the clock doesn’t wait.

At Store of Value, we advise on exactly these intersections — corporate law, control structures, and transactions. If this raises questions about your own structure, reach out to us on office@storeofvalue.in. Happy to connect.

#CorporateLaw #CompaniesAct #TreasuryShares #SEBI #CorporateGovernance #M&A #FamilyBusiness

Original source: View the LinkedIn post.