Wipro - Buyback –

Rs 625 per share

(June 2016)

TCS – Plan to
repurchase up
to 5.6 crore -
Equity Shares
at Rs 2,850 per
share
 Advantages of BB
Co’s possessing large free reserves base - can use their funds in a
wise & effective manner.

BB - changes the capital structure - undertaken as a counter-

measure against re-issue of shares

BB - To formulate an effective defensive strategy against hostile

takeover bids.
Undertaken to increase – Promoter’s Stake -With - Ultimate object of buying out -
Entire SH’ing of Non- promoter SH’s / at least to the extent to cross 90% & delist the
co. (SEBI Prohibition – Reg. 3(2))

Advantage of servicing a reduced capital base with higher

dividend yield. (EPS will increase?)
Prime reason = Surplus cash with less meaningful deployment
options is the
Power of Co. to purchase its own securities. Sec. 68
A Co. may purchase its own shares / other specified securities
(buyback) out of -

(ii) Securities (iii) Proceeds of any shares

(i) Its free reserves; / / other specified securities
Premium Account /

 P… No BB of any kind of shares / other specified

securities shall be made out of the proceeds of in
earlier issue of the same kind of shares / same
kind of other specified securities.
 Power of Co. to purchase its own securities. Sec. 68
 (2) No Co. shall purchase its own shares / other specified
securities U/ss (1), unless -
 (a) BB - Authorised by its AOA;
 (b) Spl. Res. - passed in GM authorising BB:
 P… nothing contained in T/cl. shall apply in any case where
-
 (a) BB is / less than 10% of the total paid-up equity
capital & free reserves of the Co.; &
 (b) Such BB has been authorised by BOD by means of a
Res. passed at its meeting:
 P… no offer of BB shall be made within a period of 365 days
reckoned from the date of the preceding offer of BB, if any.
 Explanation - Offer of BB - Means - Offer of such BB made
in pursuance of the resolution of BOD
 (c) BB is / less than 25 % of the total paid-up
capital & free reserves of the Co.:
P… BB of equity shares in any financial year shall
not exceed 25% of its total paid up equity capital in
that financial year;
 (d) Ratio of - Debt owed by Co. is not more than
twice the capital & its free reserves after such
BB:
P…CG may prescribe a higher ratio of the debt
than that specified U/T/Cl. for a class or classes of
Co’s.
 Explanation - Debt includes all amounts of unsecured
& secured debts;
 Sec. 68 (2)
 (e) All the shares /other specified securities for BB are
fully paid-up;
 (f) BB of shares /other specified securities listed on any
RSE is in accordance with SEBI Reg’s; &
 (g) BB in respect of shares / other specified securities
other than those specified in cl.(f) is in accordance with
the guidelines…
 68 (3) Notice of Meeting shall be accompanied by an
explanatory statement stating -
 (a) Full & complete disclosure of all material facts;
 (b) Necessity for BB;
 (c) Class of security intended to be purchased U/T BB;
 (d) Amount to be invested under BB; &
 (e) Time limit for completion of BB.
PLC Listed Co
Sec. 68 (4) - Every BB shall be completed - Within 12
months from the date of passing Spl. Res. / a resolution
passed by BOD U/ss 2 (2).

68(5) BB u/ss (1) may be –

From Existing
SH’s on a
From the From odd SPOP / Sweat
proportionate basis open market lots* Equity.
 Sec. 68 (6)
 Shall, before making such BB, file with ROC &
SEBI a Declaration of Solvency (DOS)…&
 Verified by an affidavit to the effect that BOD has
made a full inquiry into the affairs of Co. as a
result of which they have formed an opinion -
 … Co. is capable of meeting its liabilities & will
not be rendered insolvent within a period of one
year of the date of DOS adopted by BOD, &
 Signed by at least 2 directors…, one of whom
shall be MD, if any:
 P… No DOS shall be filed with SEBI by a Co.
whose shares are not listed on any RSE.
 Sec. 68 (7) & (8)
 (7) Where a Co. BB… it shall extinguish & physically
destroy the securities… within 7 days of the last date of
completion of BB.
 (8) Where a Co. completes a BB… it shall not
make further issue of the same kind of shares
(including allotment of further shares U/S 62 (1)
(a) / other specified securities within a period of
6 months
 Exception
 Bonus issue / in the discharge of subsisting obligations
such as conversion of warrants, stock option schemes,
sweat equity, conversion of PS’s / debentures into ES.
 Sec. 68 (9) & (10)
 (9) Co… shall maintain a register of securities so
bought -
 Consideration paid for securities BB
 Date of cancellation of securities
 Date of extinguishing & physically destroying of
securities &
 Such other particulars…
 (10) Co. shall after… BB - File with ROC &
SEBI, a return containing such particulars
relating to BB within 30 days of such
completion…:
 P… No return shall be filed with SEBI by a Co.
whose shares are not listed on any RSE.
 Co. makes default Sec. 68 (11)
Co. / any officer of Co. who is in default
Shall be punishable with imprisonment for a
term which may extend to 2 years, / with fine
which may extend to Rs. 50,000 / with both.
Explanation –
 (a) Specified securities - Includes ESO / other
securities as may be notified by CG from time to
time;
• (b) Free Reserves includes Securities Premium
Account.
 Transfer of Certain Sums to CRRA - Sec 69 (77AA)

Co. purchases its own shares out of free

reserves
Sum equal to the nominal value of the shares
so purchased
Shall be transferred to CRRA… &
Details of such transfer shall be disclosed in
the balance sheet.
(2) CRRA may be applied… in paying up
unissued shares of the Co. to be issued… as
fully paid bonus shares
Prohibition For BB In Certain Circumstances - Sec. 70 (old 77B)

 (1) No Co. shall directly / indirectly purchase its

own shares /other specified securities -
(a) Through any Sub. Co. including its own Sub.
Co’s ; /
(b) Through any investment Co. / group of
investment Co’s ; /
(c) If a default, by the Co., in
Repayment of deposit /
Interest payable thereon
Redemption of debentures / PS /
Payment of dividend to any SH /
Repayment of any term loan / interest payable
thereon to any FI / bank is, subsisting.
 Sec. 70 (2)
(2) No Co. shall, directly / indirectly,
purchase its own shares / other
specified securities in case such Co.
has not complied W/T/P/O/T/ SS - 92,
123, 127 & 129.