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  • Procedure Buy Back of Shares

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    Buy back results in cancellation of capital leading to an improved EPS in future. A company which has defaulted in - 1. Repayment of Deposits 2. Payment of interest on deposits 3. Redemption of debentures 4. Redemption of preference shares 5. Payment of dividend to any shareholders 6. Complying with the provisions of section 159 (filing of annual return) or section 211 (annual accounts) of the companies act, is not eligible to buy back its shares.

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    Buy back results in cancellation of capital leading to an improved EPS in future. A company which has defaulted in - 1. Repayment of Deposits 2. Payment of interest on deposits 3. Redemption of debentures 4. Redemption of preference shares 5. Payment of dividend to any shareholders 6. Complying with the provisions of section 159 (filing of annual return) or section 211 (annual accounts) of the companies act, is not eligible to buy back its shares.

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    8 views2 pages

    Procedure Buy Back of Shares

    Uploaded by

    csmohammed
    Buy back results in cancellation of capital leading to an improved EPS in future. A company which has defaulted in - 1. Repayment of Deposits 2. Payment of interest on deposits 3. Redemption of debentures 4. Redemption of preference shares 5. Payment of dividend to any shareholders 6. Complying with the provisions of section 159 (filing of annual return) or section 211 (annual accounts) of the companies act, is not eligible to buy back its shares.

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    BuybackofsharesinPrivateLimitedCompanies

    Theconceptofbuybackofsecuritiesisjustoveradecadeoldandisnormallyresortedto reorganizethecapitalstructure.Itmeansbuyingthesharesallottedtoshareholdersata predeterminedprice.BuybackresultsincancellationofcapitalleadingtoanimprovedEPSin future.BuybackincaseofprivatelimitedcompaniesaregovernedbySections77A/77AA/77B andtheUnlistedPublicLimitedCompany(BuybackofSecurities)Rules,1999. Prohibition:KindlynotethataCompanywhichhasdefaultedin 1.RepaymentofDeposits 2.Paymentofinterestondeposits 3.Redemptionofdebentures 4.Redemptionofpreferenceshares 5.Paymentofdividendtoanyshareholders 6.Repaymentofinterestorprincipaltoanyfinancialinstitutionorbank 7.ComplyingwiththeprovisionsofSection159(filingofannualreturn)section207 (distributionofdividendwithin42days)orSection211(annualaccounts)ofthe CompaniesAct,isnoteligibletobuybackitsshares. Sourcesofbuyback:TheCompanycanbuybackitssharesonlyoutofcompanysfree reservesoritssecuritiespremiumaccountoroutoftheproceedsofanysharesorother specifiedsecurities. Ceilingperfinancialyear: 25%ofthepaidupcapital+freereserves Howeverthebuybackofequitysharesshouldnotbemorethan25%ofpaidupequity sharecapital. DebtEquityRatio:Youhavetomaintaindebtequityratioof2:1(postbuyback) Authority: BoardofDirectors:Upto10%ofthepaidupcapitalandfreereservesperfinancialyear. Shareholders:Morethan10%andupto25%ofthepaidupcapitalandfreereserves. Proceduresinbrief: 1.HoldaBoardMeetingtogettheapprovaloftheBoardforthebuybackproposal(ifthe buybackisupto10%ofthepaidupcapitalandfreereserves). 2.TheArticleofAssociationoftheCompanymustauthorizetheCompanytobuybackits ownshare.IftheArticleofAssociationissilentonbuybackprovisionsthentheCompany shouldholdashareholdersmeetingtoaltertheArticleofAssociationoftheCompanyto includebuybackprovisions. 3.HoldaBoardMeetingtogettheapprovaloftheBoardforthebuybackproposalandto conveneaGeneralMeetingfortakingnecessaryapprovalfromtheshareholders(ifthe buybackismorethan25%ofthepaidupcapitalandfreereserves) 4.Holdashareholdersmeetingtotaketheapprovaloftheshareholdersforsuchbuyback.

    5.FileForm23forregisteringthespecialresolutionpassedatthegeneralmeetingwithin 30dayswithROC. 6.FileForm62attachingdraftletterofofferalongwiththedeclarationofsolvencyinForm 4A(prescribedformat)withROC. 7.Issuetheletterofoffertotheshareholdersnotlaterthan21daysfromitsfilingwith ROC.Theoffermadetoshareholderswillremainopenfornotlessthan15daysand maximumof30daysfromthedateofdispatchofsuchletter.Thesharescanonlybe boughtbackiftheofferisacceptedbytheshareholders. 8.Openaseparatebankaccountforthepaymentofconsiderationtoshareholderswho haveacceptedtheoffer. 9.Offeroncemadecannotbewithdrawn. 10.Extinguishthesharecertificatesboughtbackwithin7daysaftercompletingbuyback. 11.IntimateROCaboutbuybackinEForm4C. 12.UpdatetheregisterofBuyBack. Buybackofsharesissuedtononresidents:Itwillbeconsideredastransferfromnonresident toresidentandapplicableFEMAprovisionsinrespectoftransferofsecuritiesfrom nonresidenttoresidentintermsofRBIMasterCircularNo.13/201011dated1stJuly,2010will havetobecompliedwith.

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