Holding treasury shares may be helpful if you want to be able to provide new shares relatively frequently. For example, you could sell treasury shares opportunistically when the market price is high. You could also use treasury shares to satisfy employees' share options. In both cases, treasury shares are likely to be a more cost-effective and flexible solution than organising new share issues.
Treasury shares also offer a technical advantage if you wish to buy back shares and later resell them. If you resell the shares for a price at least equal to the price at which you bought them, there will be no reduction in distributable profits (see question 18). Cancelling shares and later issuing new ones, however, does reduce distributable profits and can thus limit your ability to pay dividends.
A company can hold a maximum of 10% of its issued share capital in treasury (or 10% of any class of shares if there is more than one class). The company's articles of association, or the resolutions authorising the purchase of treasury shares, may set a lower limit.
