Treasury Stock

Treasury stock, also known as reacquired stock, consists of a company's own shares that it has bought back from the open market. These shares are considered issued but no longer outstanding and do not have voting rights or receive dividends. Companies repurchase shares for various reasons, such as to increase earnings per share (EPS) by reducing the number of outstanding shares, to provide stock for employee compensation plans, or to signal management's confidence that the stock is undervalued.

Taiwanese companies must carefully manage treasury stock operations due to significant legal and governance risks. Improper execution, such as repurchasing shares without proper board approval, can lead to criminal penalties under Article 175 of the Securities and Exchange Act. Furthermore, corporate insiders and related parties are prohibited from selling their shares during the buyback period to prevent insider trading. A low execution rate for a buyback program without a reasonable justification can result in deductions on corporate governance evaluations, harming the company's reputation. Conversely, a well-executed buyback intended for employee incentives may earn extra credit. Failure to comply with regulations, such as the 10% cap on repurchased shares relative to total issued shares and the five-year deadline for re-issuance, can also lead to regulatory sanctions.

While no specific ISO standard clause directly governs treasury stock, its execution is closely linked to corporate governance and risk management, indirectly implicating the principles of ISO 31000 (Risk Management). Improper treasury stock operations can create financial risks (e.g., impacting liquidity), compliance risks, and concerns about market manipulation, all of which fall within the scope of ISO 31000. In Taiwan, the Corporate Governance Evaluation System includes the execution rate of treasury stock buybacks as a scoring item, highlighting its importance as an indicator of sound management and equitable treatment of shareholders, which aligns with the ISO spirit of continual improvement and stakeholder engagement.

Treasury stock decisions involve complex financial, legal, and governance risks, and Winners Research & Consulting offers unique, interdisciplinary advisory services. We combine our founder's background in preventive law with our team's expertise in financial engineering and technology law. This allows us to ensure your treasury stock program fully complies with regulations like the Securities and Exchange Act, mitigating risks of insider trading and legal penalties. More importantly, we help you vertically integrate this financial strategy with your ISO 31000 risk management framework and overall corporate governance structure. Having served leading semiconductor companies like TSMC and MediaTek, we specialize in translating complex compliance requirements into clear internal controls, ensuring that as you enhance shareholder value, you also strengthen the foundation for sustainable operations.