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An Introduction to the Law of Corporations: Cases and Materials

DGCL Sec. 160 - Corporate ownership of its own stock

Corporations, as entities separate from their stockholders, are empowered by the statute to hold and maintain all sorts of assets, including holding stock of other corporations (making the holding company possible). But can a corporation own its own stock? And, if it does, what are the implications? 

The short answer is that a corporation can indeed buy and own its own stock. However, the implications of the corporation buying its own stock are significant. When a corporation buys or redeems its own stock that stock is deemed to be “treasury stock” and is no longer outstanding stock. Treasury stock may not be voted and does not count towards determining a quorum at stockholder meetings. 

Any corporation stock held by wholly-owned subsidiary of the corporation is also deemed treasury stock. However, corporation stock held by the corporation in a fiduciary capacity (corporation stock held as part of an employee retirement plan managed by the corporation, for example), is not deemed to be treasury stock.