ALTERATION OF SHARE CAPITAL

Alteration of Share Capital

Alteration of share capital S 94 (1)

Increase

in the share capital Consolidation of share capital Conversion of shares into stocks and stocks into shares Splitting of shares subdivide into small amounts Cancellation of shares which are not issued Reduction of shares

Alteration of Share Capital

Procedure for increase of share capital

Board Resolution and approval Notice of general meeting Ordinary/special resolution Intimation to the stock exchange

Three copies of notices Six copies of resolution

E-23 Form to the Registrar within 30 days Within 30 days of the general meeting Duly stamped

Filing of special resolution

Filing of e-form No. 5

Noting the memorandum and articles

Alteration of Share Capital

Notice to Registrar of consolidation of share capital, conversion of shares in stocks 95 Notice of increase of share capital -97

File notice of increase with the registrar within 30 days after passing the resolution Details of class of shares Default is punishable with a fine extending to five hundred rupees per day of default Tribunals approved scheme Stating the share capital in its memorandum Merger resulting in increasing the share capital

Merger of authorized capital during amalgamation

File notice of increase with the Registrar

Alteration of Share Capital

Reduction of Share Capital Reduction of uncalled capital Reduction of capital on suffering loss Conditions for reduction of share capital 100 Companys articles should permit the reduction Shareholders approval by a special resolution Confirmation by the Tribunal for reduction Reduction of shares by Extinguish or reduce the liability on any of its shares not paid Either with or without extinguishing or reducing liability pay off paid up share capital which is in excess of requirement Share capital lost

Alteration of Share Capital

Types of companies eligible for reduction

Company limited by shares Company limited by guarantee and having a share capital
Buy back of shares 77A Apply the share premium account for a purpose other than purposes authorized For capital redemption account for a purpose other than for the issue of bonus shares

Reduction of share capital by

Reduction of share capital

Motives of reduction of capital

Over capitalization Writing off of losses and assets Acquisition of shares which are not in optimum lots Separation of a shareholder or a group of shareholders Distribution of accumulated profits by payment to shareholders Family arrangement Reorganization of capital or quasi capital as part of scheme of compromise or arrangement or amalgamation Revival of a sick company or company in windingup

Reduction of Capital

Reduction of securities amount

Utilization of share premium

Company has the power to reduce its capital Confirmation by the court Protection to the minority Reduction in part or whole Registration of order and minute of reduction of share capital Liability of members in respect of reduced shares 104 One year imprisonment or fine or both

Principles governing reduction of capital

Penalty for concealing name of creditors 108

Reduction of Capital

Procedure

Board meeting and approval General meeting Intimation to stock exchange Special resolution Filing of special resolution Application to Tribunal Confirmation from Tribunal Creditors consent to the reduction

Buy Back of Securities

Law applicable

S 77 A of Company Law SEBI (Buy-Back of Securities ) Regulations 1998 Private Limited Company and Unlisted Public Limited Company ( Buy-Back of Securities) Rules 1999
Increase the underlying value of shares Enhancing the earning per share (EPS) Reduce the excess share capital Pay off surplus cash not required for the business Prevent takeover bid Part of compromise agreement Rationalize the capital structure

Factors for Buy-back of shares

Benefits of Buy-Back

Improved return on investment Reduced shareholders and better service Good management control Greater liquidity to the shareholders Avoiding unpaid shares and fractional shares Buying of shares from discontented shareholders Limitations

Lock-in-period Non-transferability conditions in the agreements Regulations of RBI, other regulators Listing requirements and conditions in agreement Reduction of free reserves Debt equity ratios, other financial ratios Interest rates from financial institutions

Buy Back of Securities

Company Law provisions 77 B

Prohibition from buying their own shares

Objective is put checks and balances in the process 77 A(1) Permitted by the Tribunal and other laws Company ltd by shares are permitted to buy back Company buy its own shares from
Its free reserves Securities premium account Proceeds of any other shares or securities

Buy Back of Securities

Conditions

Authority in articles unless authorized by articles Limit upto which the securities can be bought

Maximum limit 25% of its total paid up capital and free reserves according to last audited balance sheet Paid capital include equity and preferential shares Not more twice the capital and free reserves existing security holders Open market Odd lots Securities issued to employees - stock options or sweat equity

Maintenance of post buy-back debt-equity ratio

Buy back of shares from -5

Only fully paid shares are to be purchased

Buy-Back of Securities
Transfer to capital redemption reserve account 77 AA Sanction by special resolution of General Meeting

No sanction is required if the buy back is less than 10% Such buy back is authorized by the Board

Special resolution and explanatory statement

Disclosure about the scheme of buyback in the general meeting

Filing of a copy of resolution with SE and RoC Methods of buy back

From existing share holders Open market book building process or stock exchange Odd lots

No negotiated deals

Buy- Back of Securities

Declaration of solvency
Board of directors resolution about solvency Filing with RoC and SEBI Form 4 A Filing of affidavit No filing with SEBI for unlisted company shares

Time Limit for completion of buy back

Twelve months from date of resolution

Restriction on issue of new securities after buyback upto six months -8

No further issue No private placement or right issue Bonus shares and conversion of securities are permitted

Buy-back of Securities
Register of shares bought from the scheme Return of shares bought -10 With RoC, SEBI e- Form 4 C No filing for unlisted company Destroying of the physical securities within seven days of last date of conclusion of buy back -7 Penalty for default of compliance two years imprisonment or fine up to fifty thousand or both Prohibition for buy back 77 B Through any subsidiary Through any investment company No default in payment of deposits or redemptions No buy back of shares when the company has not filed the annual returns, or paid the dividend or file the financial statements with RoC

Buy-Back of Securities

Process Open market tender offer

Conducting the Board Meeting information to SE 7 days before meeting Special resolution and other approvals in the GM File Resolution with RoC, SE and SEBI Public announcement and offer File offer letter and solvency certificate with SEBI with fee and RoC immediately one day Dispatch of letters of offer Specified date - dates of offer and close Opening of escrow account and transfer money to special account Finalize the list of the applicants advertisement in news paper Payments to applicants Destroy the physical securities File report with RoC 110 days total

Buy-back of Securities

Through SE route
Board meeting date and information to SE Board meeting special resolution and other approval Public announcement Filing papers with SEBI and RoC and SE Commencement of purchases Inform the particulars of purchase to SE Verify the securities and payments to applicants Reporting to SEBI and SE Advertisements in national daily File report with RoC

Buy-Back of Securities

Buyback of securities by unlisted company

From existing security holders on proportionate basis From the employees of the company Esops or Sweat equity Board Meeting Special Resolution Disclosures and explanatory statements Declaration of solvency Letter of offer to target and filing with RoC Rule 6(1) Acceptance of offer and related procedures - R 6(2) Verification of offer application received within 21 days R 6 (3) Payment of consideration within 7 days R 7(2) Compilation of other obligations R 8

Buy-Back Securities

Buy Back should be completed within 12 months 77A(4) Filing of returns with RoC and SEBI 77 A Extinguishment and destroy of physical certificates R 10 within 7 days Furnish certificate to RoC duly signed by the Two directors and Company Secretary R 10 Register of Securities bought back