# Corperation that owns all it's stock - what happens? **URL:** \ **Category:** Factual Questions\ **Created:** [September 16, 2011, 2:41pm UTC](https://boards.straightdope.com/t/corperation-that-owns-all-its-stock-what-happens/596520 "2011-09-16T14:41:40Z")\ **Posts on this page:** 14\ **Page:** 3
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [September 18, 2011, 3:03pm UTC](https://boards.straightdope.com/t/corperation-that-owns-all-its-stock-what-happens/596520/41 "2011-09-18T15:03:39Z")
> [@Lemur866](#): > > How could they have the company buy itself from the stockholders, therebuy showing that they believe the corporation is worth more than the stock value, without screwing over the shareholders? 😕 😕 😕 😕 😕 😕 😕 I guess everyone really does have **septimus** in their Ignore Users list. :dubious: As I’ve explained at least thrice in this thread, the situation arises (and does arise in the real world, though never to the absurdem of outstanding shares dropping to zero) **when there is debt**. Officers are not defrauding stockholders, in the plausible scenario. Instead officers and stockholders are conspiring together to exploit debtholders. Does this help? I used the ordinary font size, but your browser may have a Zoom option, ---
**Author:** ![Elendil\_s\_Heir](https://avatars.discourse-cdn.com/v4/letter/e/7cd45c/32.png) [@Elendil\_s\_Heir](https://boards.straightdope.com/u/Elendil_s_Heir)\ **Post date:** [September 18, 2011, 3:54pm UTC](https://boards.straightdope.com/t/corperation-that-owns-all-its-stock-what-happens/596520/42 "2011-09-18T15:54:38Z")
> [@KneadToKnow](#): > > Concur. A small list of well-known private companies from [Wikipedia](http://en.wikipedia.org/wiki/Privately_held_company): > > Koch Industries, Bechtel, Cargill, Chrysler, PricewaterhouseCoopers, Pilot Travel Centers, Ernst & Young, Publix, Deloitte Touche Tohmatsu, Hearst Corporation, S. C. Johnson, and Mars are among the largest privately held companies in the United States. IKEA, Jaguar Cars, J C Bamford Excavators (JCB), Land Rover, LEGO, Bosch, Rolex and Victorinox are some examples of Europe’s largest privately held companies. Chrysler? Really? That amazes me. Smucker’s is entirely privately-held, I know. ---
**Author:** ![Northern\_Piper](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/northern_piper/32/5304_2.png) [@Northern\_Piper](https://boards.straightdope.com/u/Northern_Piper)\ **Post date:** [September 19, 2011, 12:06am UTC](https://boards.straightdope.com/t/corperation-that-owns-all-its-stock-what-happens/596520/43 "2011-09-19T00:06:35Z")
> [@ZenBeam](#): > > [QUOTE=Northern Piper] > > I can only comment on Canadian corporate law, but the general rule in Canada is that a corporation cannot own its own shares. Section 33(1) of the Canada Business Corporations Act is typical: > […] > As well, some posters have commented that a corporation may buy its own shares to improve the value of the remaining outstanding shares. It’s important to understand that when a corporation does that, it is redeeming those shares, i.e. - cancelling them for value. See s. 36 of the Act. It’s not going to be keeping those shares as an investment. This doesn’t say that a corporation can’t buy all its shares, just that they would all then be redeemed. [/QUOTE] True, but [s. 39(6)](http://laws-lois.justice.gc.ca/eng/acts/C-44/page-13.html) then requires that when a corporation purchases or redeems shares, it must then cancel them, or segregate them as “authorised but unissued”: > [@](#): > > \*\*Cancellation or restoration of shares > > 39\*\*(6) Shares or fractions thereof of any class or series of shares issued by a corporation and purchased, redeemed or otherwise acquired by it shall be cancelled or, if the articles limit the number of authorized shares, may be restored to the status of authorized but unissued shares of the class. So if a corporation were to buy all of its shares, for redemption or under any of the other exceptions, it would be required to cancel them - meaning that the corporation ceases to function, because it would no longer have shareholders to elect the board, approve the necessary steps at the annual general meeting, and so on. ---
**Author:** ![lisiate](https://avatars.discourse-cdn.com/v4/letter/l/f05b48/32.png) [@lisiate](https://boards.straightdope.com/u/lisiate)\ **Post date:** [September 19, 2011, 1:54am UTC](https://boards.straightdope.com/t/corperation-that-owns-all-its-stock-what-happens/596520/44 "2011-09-19T01:54:24Z")
The [New Zealand Companies Act](http://www.legislation.govt.nz/act/public/1993/0105/latest/whole.html#DLM320461) has very similar provisions as the Canadian Act **Northern Piper** quotes above. Under the NZ Act a company that purchased all it’s own shares would not only cease to function but would also fail to comply with the essential requirements of section 10 of the NZ Companies Act: > [@](#): > > 1. Essential requirements > > A company must have— > > (a) a name; and > > (b) 1 or more shares; and > > (c) 1 or more shareholders, having limited or unlimited liability for the obligations of the company; and > > (d) 1 or more directors. Failing to comply with section 10 is grounds for removal from the register. I’d be surprised if the Canadian or US legislation didn’t have something similar. ---
**Author:** ![Rand\_Rover](https://avatars.discourse-cdn.com/v4/letter/r/db5fbb/32.png) [@Rand\_Rover](https://boards.straightdope.com/u/Rand_Rover)\ **Post date:** [September 19, 2011, 2:12am UTC](https://boards.straightdope.com/t/corperation-that-owns-all-its-stock-what-happens/596520/45 "2011-09-19T02:12:05Z")
The OP simply describes a corporate liquidation–a corporation transfers all of its assets to all of its shareholders pro rata in exchange for their stock, typically followed by dissolution of the corporation under state law. So, the corporation simply ceases to exist. ---
**Author:** ![kenobi\_65](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/kenobi_65/32/13178_2.png) [@kenobi\_65](https://boards.straightdope.com/u/kenobi_65)\ **Post date:** [September 19, 2011, 2:24am UTC](https://boards.straightdope.com/t/corperation-that-owns-all-its-stock-what-happens/596520/46 "2011-09-19T02:24:34Z")
> [@Elendil\_s\_Heir](#): > > Chrysler? Really? That amazes me. Well, it depends on how you define “privately held”. Chrysler is currently owned by Chrysler Group LLC. Fiat owns 53.5% of Chrysler Group LLC (and is, itself, publically held), while the United Auto Workers union owns the other 46.5%. From 2007 to 2009, Chrysler was mostly owned by Cerberus Capital Management, which is a private equity company. That may be what the Wikipedia list refers to – if so, it’s in need of updating. At any rate, Cerberus gave up its ownership stake in Chrysler in 2009 as part of the government bailout deal for Chrysler. ---
**Author:** ![md2000](https://avatars.discourse-cdn.com/v4/letter/m/73ab20/32.png) [@md2000](https://boards.straightdope.com/u/md2000)\ **Post date:** [September 19, 2011, 1:16pm UTC](https://boards.straightdope.com/t/corperation-that-owns-all-its-stock-what-happens/596520/47 "2011-09-19T13:16:54Z")
> [@Boyo\_Jim](#): > > How would all these shareholder know the value of the stock was rising as the corporation bought them back? How would the market know? If the company was doing this quietly, how would the market know how to react? Anyone who sets out to buy a significant portion of a company’s stock must declare their intent for stocks on the stock exchange. Plus, there is fiduciary duty - anyone who runs a corporation must run it in the best interest of the shareholders - and there are further rules to protect minority shareholders from being screwed over by the majority. Any board that approves or executive that implements buying back shares from shareholders for less than its worth by not disclosing important information is violating those terms, and the stock and punitive damages will be returned to the shareholders; note these damages will also come from the board members’ private funds too, not the company. Basically, the government has seen all sorts of tricks played with corporation shares and how they are juggled, and anything that seems like fraud probably is under some rule or other. The people who actively implement that action are also themselves liable. If the company owes so much money that a share is worth zero or negative, then why buy back? (And where does the money come for that, anyway if they have none?) Just declare bankruptcy and fold. ---
**Author:** ![Elendil\_s\_Heir](https://avatars.discourse-cdn.com/v4/letter/e/7cd45c/32.png) [@Elendil\_s\_Heir](https://boards.straightdope.com/u/Elendil_s_Heir)\ **Post date:** [September 19, 2011, 3:18pm UTC](https://boards.straightdope.com/t/corperation-that-owns-all-its-stock-what-happens/596520/48 "2011-09-19T15:18:44Z")
> [@kenobi\_65](#): > > Well, it depends on how you define “privately held”. > > Chrysler is currently owned by Chrysler Group LLC. Fiat owns 53.5% of Chrysler Group LLC (and is, itself, publically held), while the United Auto Workers union owns the other 46.5%. > > From 2007 to 2009, Chrysler was mostly owned by Cerberus Capital Management, which is a private equity company. That may be what the Wikipedia list refers to – if so, it’s in need of updating. At any rate, Cerberus gave up its ownership stake in Chrysler in 2009 as part of the government bailout deal for Chrysler. That makes more sense. Thanks. ---
**Author:** ![smiling\_bandit](https://avatars.discourse-cdn.com/v4/letter/s/e9a140/32.png) [@smiling\_bandit](https://boards.straightdope.com/u/smiling_bandit)\ **Post date:** [September 19, 2011, 7:49pm UTC](https://boards.straightdope.com/t/corperation-that-owns-all-its-stock-what-happens/596520/49 "2011-09-19T19:49:36Z")
Here’s a brain puzzler related to the above. I’ve been curious about this for a while. Let us say you have two corporations: Alpha Agri-Pharma and Beta Techno-Industrial Combine. What happens if Alpha buys up a majority of Beta’s shares… while Beta does the same thing! We could imagine various scenarios to this: Maybe Alpha is trying a hostile takeover, and then Beta goes for an aggressive retaliation. Regardless, at the end of the day, Alpha owns the majority of Beta, and Beta owns a majority of Alpha. My only response would be that either the thing goes to litigation _ **HELL** _, or the following… After all, just because Alpha owns a majority Beta doesn’t mean it can hand out orders. Beta’s people are still in place. It’s CEO is decided by the board - and boards have terms. So if Alpha has a board which terms out sooner than Beta’s, then Beta can put anyone it wants in Alpha. Of course, I expect all kinds of dirty tricks to occur. ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [September 19, 2011, 7:59pm UTC](https://boards.straightdope.com/t/corperation-that-owns-all-its-stock-what-happens/596520/50 "2011-09-19T19:59:47Z")
See [this very recent thread](http://boards.straightdope.com/sdmb/showthread.php?t=624583). ---
**Author:** ![lisiate](https://avatars.discourse-cdn.com/v4/letter/l/f05b48/32.png) [@lisiate](https://boards.straightdope.com/u/lisiate)\ **Post date:** [September 19, 2011, 9:06pm UTC](https://boards.straightdope.com/t/corperation-that-owns-all-its-stock-what-happens/596520/51 "2011-09-19T21:06:56Z")
Again, I would be surprised if US corporations law didn’t have an equivalent to section 82 of the NZ Companies Act: > [@](#): > > **82 Subsidiary may not hold shares in holding company** > > (1) Subject to this section, a subsidiary must not hold shares in its holding company. > > (2) An issue of shares by a holding company to its subsidiary is void and of no effect. > > (3) A transfer of shares in a holding company to its subsidiary is void and of no effect. > > (4) Where a company that holds shares in another company becomes a subsidiary of that other company— > > (a) the company may, notwithstanding subsection (1), continue to hold those shares; but > > (b) the exercise of any voting rights attaching to those shares shall be of no effect. ---
**Author:** ![sponseld](https://avatars.discourse-cdn.com/v4/letter/s/d9b06d/32.png) [@sponseld](https://boards.straightdope.com/u/sponseld)\ **Post date:** [January 30, 2015, 10:02pm UTC](https://boards.straightdope.com/t/corperation-that-owns-all-its-stock-what-happens/596520/52 "2015-01-30T22:02:05Z")
I realize this is an old thread, but I was asking the same original question and a friend found this thread. One thing that I did not see mentioned (except in the original question) was that the remaining owner(s) might want to sell their remaining shares back to the company for some reason such as removing themselves from personal responsibility for the corporation. Another possibility is that someone might do this with a relatively small and low value corporation just for the “fun” of it to be able to say that the corporation now owns itself. Obviously, for a corporation to buy back all of its shares is not a common or likely occurrence. And it may not even be legally permitted. But the original question was not whether it was likely or permitted, even though many responders seemed to answer those questions rather than the original question. Here once again is the original question: The stock holders are the owners of the corporation, what happens if a company buys back all it’s stock, who owns the corporation? Who votes for the corporate officers? Could you abandon a small single owner/shareholder corporation by having it buy you out and walk away? Another thing I did not see mentioned, and this seems crucial to the answer, is whether a corporation can itself be an owner of something. It certainly seems that it can, since corporations own all sorts of assets. And for the corporation to buy back all of its shares it is not like a snake eating itself since it is not destroying itself in the process. It still exists, it is just now without an owner other than itself. In fact at that point it seems as if the employees could do whatever they want since there would no longer be any ultimate authority in charge. I certainly don’t have the answer, but I think it is an interesting if mostly-academic question. 😕 ---
**Author:** ![davidm](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/davidm/32/225_2.png) [@davidm](https://boards.straightdope.com/u/davidm)\ **Post date:** [January 30, 2015, 11:31pm UTC](https://boards.straightdope.com/t/corperation-that-owns-all-its-stock-what-happens/596520/53 "2015-01-30T23:31:59Z")
I think that it may be an unanswerable question and that the fact that it’s illegal (if that is the case) really is relevant since, if it is illegal, then there are no laws spelling out what happens in such a case, so there is no answer to the question. ---
**Author:** ![md2000](https://avatars.discourse-cdn.com/v4/letter/m/73ab20/32.png) [@md2000](https://boards.straightdope.com/u/md2000)\ **Post date:** [January 31, 2015, 2:26pm UTC](https://boards.straightdope.com/t/corperation-that-owns-all-its-stock-what-happens/596520/54 "2015-01-31T14:26:55Z")
Again, stock held by the corporation may not be voted. (In normal cases, because this would pit the board against other stockholders when they’re supposed to be doing what they ask, so it’s not allowed.) As pointed out in a similar thread, that last batch of stock is worth the same as the whole company. a Company that does not pay the full value to the shareholder (i.e. net worth of the company) is violating its fiduciary obligation not to rip off minority shareholders. [Previous page](https://boards.straightdope.com/t/corperation-that-owns-all-its-stock-what-happens/596520.md?page=2)