Meaning

The repurchase of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies will buy back shares either to increase the value of shares still available (reducing supply), or to eliminate any threats by shareholders who may be looking for a controlling stake.

Sources to buy back

Section 77A, inserted by the Act 1991 allows a company to buy its own shares and other specified securities out of : i. Its free reserve ii. The securities premium account iii. the proceeds of any shares or other specified securities : Provided that no buy-back of any kind of shares or other specified securities shall be made out of the proceeds of an earlier issue of the same kind of shares or same kind of other specified securities

Conditions for Buy back

the buy-back is authorised by its articles; a special resolution has been passed in general meeting of the company authorising the buy-back the buy-back is or less than ten per cent of the total paid-up equity capital and free reserves of the company; and such buy-back has been authorised by the Board by means of a resolution passed at its meeting

 There can not be more than one buy-back by the board within period of 365 days Through a special resolution , the buy back is less than 25% of its total paid up capital and free reserves of the company. the ratio of the debt owed by the company is not more than twice the capital and its free reserves after such buy-back

 all the shares or other specified securities for buy-back are fully paid-up the buy-back with respect to listed securities is in accordance with the regulations made by the Securities and Exchange Board of India in this behalf Every buy-back shall be completed within twelve months from the date of passing the Special resolution or a resolution passed by the Board