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Project Report on Buy- Back of Shares-khushbu

Project Report on Buy- Back of Shares-khushbu

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Published by: cahimanianand on Jan 11, 2012
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07/22/2013

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PROJECT REPORTONBUY-BACK OF SHARES
SUBMITTED BY:
KHUSHBU GUPTAREG. NO. 220857420/04/2010
 
INTRODUCTION
 
Section 77A
 
of the Companies Act, 1956 empowers a company to purchase itsown shares or other specified securities in certain cases. It has overriding effectson all other provisions contained in the Act. Now a company may purchase itsown shares or other specified securities (hereafter referred to as "buy-back") inthe manner provided in sections 77A, 77AA and 77B. Specified securities mayinclude employees' stock option or other securities as may be notified by theCentral Government.
SOURCES FROM WHICH BUY-BACK CAN BE MADE
As per provisions of Section 77A of the Act, the buy-back of shares andsecurities can be made out of:—(i) its free reserves, or (ii) the securities premium account, or (iii) the proceeds of any issue of shares or other specified securities other thanproceeds of an earlier issue of the same kind of shares or same kind of specifiedsecurities which are proposed to be bought back.No Buy-back of any kind of shares or other specified securities shall be made outof the proceeds of an earlier issue of the same kind of shares or same kind of other specified securities.
TERMS AND CONDITIONS FOR BUY-BACK OF SHARES
The following terms and conditions are required to be fulfilled by a company inorder to become eligible to buy-back its own securities:—(a) There must be a provision in the Articles of Association authorizing thecompany to buy-back its own shares, otherwise the Articles must beamended by a special resolution to incorporate a suitable provision.(b) A special resolution must also be passed in a general meeting of thecompany authorizing the Board of directors to buy-back the shares of thecompany or other specified securities.
 
(c) The maximum quantum of buy-back can be upto 10% of the total paid upcapital and free reserves by the authority of the Board by means of resolutionof the Board meeting.(d) After the buy-back, the debt of the company namely the amount of securedand unsecured debts shall not be more than twice the paid-up capital and freereserves.According to Notification GSR 479(E) issued by the DCA on 12th June, 2005,the debt equity ratio for listed Housing Finance Companies for the purposesof clause (d) of sub-section (2) of section 77A shall be such as may bespecified by the National Housing Bank being the regulator, in consultationwith the Central Government.(e) All the shares or other specified securities involved for buy-back must be fullypaid-up.(f) The buy-back of the shares or other specified securities, if listed in any stockexchange, must be carried out in accordance with the regulations framed bythe Securities and Exchange Board of India.(g) The buy-back of the shares or other specified securities, if any of the privatecompany and unlisted public company shall be made as per the guidelinesissued by the Government.(h) The explanatory statement sent to members along with the notice for passingthe special resolution referred to in clause (b) above shall contain all relevantinformation.
DISCLOSURES IN EXPLANATORY STATEMENT
The notice of the meeting at which special resolution is proposed to be passedshall be accompanied by an explanatory statement stating:-1.a full and complete disclosure of all material facts.2.the necessity of buy-back3.the class of security intended to be purchased under the buy-back4.the amount to be invested under the buy-back5.the time limit for completion of buy-back.

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