Q1.

A company with surplus funds can opt for a share buyback to utilize its excess cash for purposes
such as increasing share value, consolidating the company, and showcasing financial strength.
This process, known as "Buyback of Shares," involves a company repurchasing its own
previously issued shares, authorized under Section 68 of the Companies Act, 2013.

The company can buy back shares using its free reserves, securities premium account, or
proceeds from recent share issuances, with exceptions for previous issuances of the same type of
shares or securities. Buybacks can be executed in several ways, including proportional buybacks
from existing shareholders, open market purchases, or acquiring securities issued to employees
through stock option or sweat equity schemes.

The procedure for share buyback by unlisted companies is regulated by Sections 68, 69, and 70
of the Companies Act, 2013, in conjunction with Rule 17 of the Companies (Share Capital and
Debentures) Amendment Rules, 2016.

Several mandatory requirements must be met, including authorization in the company's articles,
approval through special resolutions, maintaining debt-equity ratios, ensuring fully paid
securities, and respecting a one-year gap between buyback offers. The process involves steps like
board meetings, general meetings, filing of forms, and record-keeping.

The company must also transfer specific sums to the Capital Redemption Reserve Account and
physically destroy the bought-back shares or securities.

Numerous restrictions and obligations are in place, including refraining from issuing the same
type of shares or securities for six months, providing accurate information in the letter of offer,
avoiding borrowed funds for buyback, and not using proceeds from earlier share or securities
issuances for buyback.

Q2.
Section 68 grants a company the power to repurchase its own securities, including shares and
other specified financial instruments. This buyback can be financed through various sources such
as the Securities Premium Account, proceeds from the issuance of shares or specified securities,
and Free Reserves. However, it's essential to note that the repurchase cannot be funded from the
proceeds of an earlier issue of the same type of securities.

The buyback process requires specific authorizations and resolutions. The company must obtain
authorization from its Articles of Association (AOA). If the buyback involves an amount up to
10% of the aggregate of paid-up equity capital and free reserves, a Board Resolution passed
during a board meeting is necessary. For buybacks exceeding this limit, a Special Resolution is
required, ensuring transparency and approval for buybacks that impact a more significant portion
of the company's capital.

In the case of repurchasing equity shares, the company is limited to a maximum of 25% of the
paid-up equity capital in any financial year. This ensures a balanced approach to share buybacks,
preventing excessive reduction of equity capital. Additionally, a Debt Equity Ratio of 2:1 should
be maintained post buyback, balancing debt and equity within the company.

Furthermore, it's crucial to adhere to specific regulations, with listed companies following SEBI
Regulations and unlisted companies adhering to relevant rules. To maintain fairness, there should
be a minimum one-year gap between successive buyback offers to prevent undue market
manipulation.

In summary, Section 68 outlines the rules and procedures for a company to repurchase its
securities, ensuring that such actions are conducted transparently and responsibly, in the best
interest of the company and its stakeholders.

Q3.
The relevant sections in the Companies Act 2013 regarding disclosures are as follows:

Initial Disclosures:
- Every person on appointment as KMP or a director of the company or upon becoming a
promoter or member of promoter group shall disclose his holding of securities of the company
within 7 days of his appointment as KMP, director or becoming a promoter[1].

Continual Disclosures:
- Every promoter, member of promoter group, designated person and director of every company
shall disclose to the company the number of securities acquired or disposed of within 2 trading
days if the value of the securities traded over any calendar quarter exceeds ` 10 lakhs or such
other value as may be specified.
- On receipt of above information, the company shall notify the same to the stock exchange
within 2 trading days of receipt information or from becoming aware of such information.
- The above disclosures shall be made in such form and such manner as may be specified by the
SEBI from time to time[1].

Disclosures by other connected persons:

- A listed company may at its discretion require any other connected person to make disclosures
of holdings and trading in securities in such form and at such frequency as may be determined by
the company in order to monitor compliance].
Section 184 of the Companies Act 2013 mandates company directors to disclose their interests in
contracts and arrangements with the companies. Every director shall disclose his concern or
interest in any company or companies or bodies corporate (including shareholding interest),
firms or other association of individuals, by giving a notice in writing in Form MBP ]. If a
director fails to disclose his interest in a contract at a Board meeting or participates in the
meeting of the Board where he has disclosed his interest, he shall be punishable with
imprisonment or with fine or with both.

Q4.
In the Indian context, a company undertaking a share buyback must adhere to a set of legal
requirements, including:

Compliance with the Companies Act, 2013, and the Securities and Exchange Board of India
(Buy Back of Securities) Regulations, 2018.

Offering a premium over the market share price to encourage shareholders to participate in the
buyback.

Avoiding share repurchases that would impair the company's capital.

Refraining from share buybacks if the company has defaulted on various financial obligations,
such as deposit repayments, interest payments, or dividend payments.

Ensuring compliance with specific sections of the Companies Act, 2013 (sections 92, 123, 127,
and section 129).

In addition to these legal requirements, companies must also consider how they treat
shareholders who choose not to participate in the buyback. They can offer further opportunities
for shareholders to tender their shares or retain the shares as treasury shares.

Failure to meet these legal requirements can result in legal action from shareholders, personal
liability for directors, capital impairment, and penalties for non-compliance with relevant laws
and regulations. Thus, companies must uphold these requirements and treat all shareholders
fairly during a share buyback.

Q5.
Section 70 of the Companies Act, 2013 delineates the conditions under which a company is
prohibited from repurchasing its own securities. This section is structured into two subsections,
and the main stipulations are as follows:
Subsection (1): A company is disallowed from directly or indirectly acquiring its own shares or
specified securities in the following circumstances:

Through any subsidiary company, including its own subsidiary companies.

Through any investment company or a group of investment companies.
When the company has defaulted in repaying deposits accepted, regardless of whether they were
accepted before or after the commencement of this Act, or in fulfilling obligations such as
interest payments, redemption of debentures or preference shares, dividend payments to
shareholders, or repayment of term loans or interest to financial institutions or banking
companies. Nevertheless, this buyback restriction can be lifted if the default is rectified, and a
minimum of three years has passed since the default ceased to exist.
Subsection (2): A company is not permitted, either directly or indirectly, to acquire its own
shares or specified securities if it has failed to comply with the provisions detailed in sections 92,
123, 127, and section 129.

An illustrative case relevant to Section 70 of the Companies Act, 2013 is the matter of In Re:
Tata Steel Limited [2018] (NCLT Kolkata). In this case, the National Company Law Tribunal
(NCLT) ruled that Tata Steel Limited's share buyback contravened Section 70(1)(c) of the
Companies Act, 2013, as the company had defaulted in repaying term loans and the associated
interest to financial institutions. The NCLT also determined that the buyback did not fall under
the proviso to Section 70(1)(c), as the default had not been rectified, and the requisite three-year
period had not transpired since the default ceased to exist