Scribd
Upload
19 views8 pages

Buyback

Uploaded by

prachii25165
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
19 views8 pages

Buyback

Uploaded by

prachii25165
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 8

Buy-back is the process by which Company buy-back

it’s Shares from the existing Shareholders usually at a


price higher than the market price. When the Company
buy-back the Shares, the number of Shares outstanding
in the market reduces/fall. It is the option available to
Shareholder to exit from the Company business. It is
governed by section 68 of the Companies Act, 2013.
It is a corporate action event wherein a company makes
a public announcement for the buyback offer to acquire
the shares from existing shareholders within a given
timeframe. The company announces an offer price for
the buyback that is generally higher than the
current market price.
• To improve Earning per Share;
• To use ideal cash;
• To give confidence to the Shareholders at the time
of falling price;
• To increase promoter’s shareholding to reduce the
chances of takeover;
• To improve return on capital, return on net-worth;
• To return surplus cash to the Shareholder.
A Company may buy-back its Shares or other specified
Securities by any of the following method-
• From the existing shareholders or other
specified holders on a proportionate basis
through the tender offer;
• From the open market through
1. Book-Building process
2. Stock Exchange
Provided that no buy-back for fifteen percent or
more of the paid-up capital and reserves of the
Company can be made through open market.
• From odd-lot holders.
A Company can purchase its own shares and other
specified securities out of –
• its free reserve; or
• the securities premium account; or
• the proceeds of the issue of any shares or other
specified securities.
However, Buy-back of any kind of shares or other
specified securities cannot be made out of the
proceeds of the earlier issue of same kind of shares or
same kind of other specified securities.
As per Section 68 of the Companies Act, 2013 the conditions
for Buy-back of shares are-
• Articles must authorise otherwise Amend the Article by
passing Special Resolution in General Meeting.
• For buy-back we need to pass Special Resolution in General
Meeting, but if the buy-back is up to 10%, then a Resolution
at Board Meeting need to be passed.
• Maximum number of Shares that can be brought back in a
financial year is twenty-five percent of its paid-up share
capital.
• Maximum amount of Shares that can be brought back in a
financial year is twenty-five percent of paid-up share capital
and free reserves (where paid-up share capital includes
equity share capital and preference share capital; & free
reserves includes securities premium).
• Post buy-back debt-equity ratio cannot exceed 2:1.
• Only fully paid-up shares can be brought back in a financial
year.
• Company must declare its insolvency in Form SH-9 to
Register of Companies, signed by At least 2 Directors out of
which one must be a Managing Director, if any.
• The notice of the meeting for which the Special Resolution
is proposed to be passed shall be accompanied by an
explanatory statement stating
1. a full and complete disclosure of all the material facts;
2. the necessity of buy-back;
3. the class of shares intended to be bought back;
4. the amount invested under the buyback;
5. the time limit for completion of buyback;
• The Company must maintain a Register of buy-back in Form
SH-10.
• Now, Submit Return of buy-back in Form SH-11 Annexed
with Compliance Certificate in Form SH-15, Signed by 2
Directors out of which One must be a Managing Director, if
any.
• A Company should extinguish and physically destroy shares
bought back within 7 days of completion of the buy-back.
• Observe 6 months cooling period i.e. no fresh issue of
share is allowed.
• No offer of buy-back should be made by a company within
a period of one year from the date of the closure of the
preceding offer of buy-back.
• The buy-back should be completed within a period of one
year from the date of passing of Special Resolution or Board
Resolution, as the case may be.

Securities in certain

According to section 70 of the Companies Act, 2013, A


Company should not buy-back its securities or other
specified securities, directly or indirectly –
• Through any subsidiary including its own subsidiaries;
or
• Through investment or group of investment
Companies; or
• When Company has defaulted in repayment of
deposits or interest payable thereon, or in redemption
of debentures or preference shares or repayment of
any term loan. The prohibition is lifted if the default has
been remedied and a period of 3 years has elapsed
after such default ceased to subsist.
• When Company has defaulted in filing of Annual
Return, declaration of dividend & financial statement.

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy