PPT – RI,BI, BUYBACK

Further Issue of Share Capital(Section 62)

WHENEVER CO. COMES OUT WITH FURTHER ISSUE OF SHARES IT MUST
BE OFFERED TO
A. existing equity shareholders
-in proportion to the paid-up share capital as nearly as circumstances admit
s.t following 3 conditions-
1. offer period shall be minimum 15 days and max. 30 days(for private
company exemption-offer period can be less than 15 days if agreed by at
least 90% members.[Minimum limit amended to 7 days in rules]
2. Unless the articles otherwise provide –renunciation allowed partly also
fully also
3. Remaining unsubscribed shares will be disposed of by the BOD in the best
interest of the company.(outsiders/cancel)
B. ESOP to employee by passing SR in GM(Prvt. Co.-OR in GM).
C. To any other person by passing SR in GM and valuation of Share to
be done by Registered valuer.

(2). Offer letter shall be dispatched by speed post/courier/Regd.

Post/Email at least 3 days before offer period starts.

(3)Co. can convert its convertible debentures/loan into equity shares on

the date of conversion-provided before issue of such convertible
debenture /loan SR in GM was passed.
(4) Govt. on grounds of public interest can direct the co. to convert
convertible/non-convertible debentures issued by co. to Govt. into
equity shares.

If co. aggrieved by such order of Govt.-

Then within 60 days of receipt of such order –apply to NCLT-NCLT after
hearing both parties shall pass such order as it deems fit.

(5) Govt. to give due regard to the financial position of the company
(6)Authorised share capital of the co.is deemed to be increased by the
amount of share capital issued to Govt. under (4)
BONUS ISSUE(Section 63)

• Equity shares issued at no cost to existing shareholders of co.

• Also, can be said as Capitalisation of profits
• When a company is prosperous and accumulates large distributable profits, it converts these
accumulated profits into capital and divides the capital among the existing members.
• Sources-
a) Free reserves
b) Security premium
c) Capital redemption reserve
No bonus shares can be issued from a reserve created out of revaluation of assets
CONDITIONS-
• AOA must authorise –else alter articles by passing SR in GM
• Bonus shares can be recommended by BOD by passing Board Resolution at board meeting
• Bonus shares will be approved by shareholders by passing OR in GM
• Company should not have defaulted in the payment of FD or debt
securities
• Should not have defaulted in payment of statutory dues like bonus,
PF, Gratuity
• Bonus shares can be given only on fully paid-up shares
• Cannot be given in lieu of dividend
• Co. must satisfy such other conditions as may be prescribed in rules-
(rule pres. Only 1 condition-bonus shares once recommended cannot
be withdrawn
BUYBACK
• The Companies (Amendment Act),1999 introduced this provision
• MEANING- co. buying its own security.
• Reasons-
a) To use and return surplus cash to shareholders
b) To increase earnings per share[EPS]
c) To concentrate the diluted control
d) To give confidence to shareholders at the time of falling prices/to
support share price during temporary weakness.
e) To increase promoter's shareholding(%) to reduce chances of
takeover[note promoters no. of shares will not increase]
• TCS in 2022(march) made buy back of Rs 4 cr equity shares at price of
Rs 4500 per share ,market price was Rs 3700 per share
MODES OF BUYBACK
Open market[only listed co.]
Open offer
Purchasing security issued to employees under ESOP/sweat equity
• SECTION 68-POWER OF A COMPANY TO PURCHASE ITS OWN
SECURITIES out of:-
All listed+ unlisted companies may purchase its own shares out of-
 Its free reserves
 Securities premium account
 Proceeds of earlier issue of shares
CONDITIONS FOR BUYBACK-

PRE BUY-BACK CONDITIONS:-

No company shall purchase its own shares or other specified
securities unless:-
• Buy -back authorised by its articles, else alter articles by passing SR in
GM
• SR in GM of the company authorising buy- back[If only up to 10% of
Paid -up share capital and free reserves then Board Resolution at
Board Meeting]
• Total buy back IS less than 25% or less of total paid up share capital
and free reserves of the company.
• Ratio of secured and unsecured debts owed by the company after
buyback is not more than twice the paid up capital and free reserves
• Buy-back can be done only on fully paid- up shares
• Buy-back of shares listed on stock exchange in accordance with SEBI
regulations; others in accordance as prescribed
• No offer of buy back within one year from date of closure of
preceding buyback
• Before making buy-back declare solvency to ROC and SEBI, signed by
atleast 2 directors one should be MD [in form SH-9]
• Notice of meeting-SR at GM to be accompanied by explanatory
statement-
- full disclosure of material facts
-necessity for buy-back
- type of security intended to be purchased after buy back
-amount invested under buy back
-time limit for completion
• Every buy back to be completed within period of one yr from date of
passing SR
• POST BUYBACK FORMALITIES
Maintain Register of Buy-back with details like-
 no. of shares of buy-back,
date of buy-back,
price, mode of buy-back
name of the shareholders whose shares were bought back
Return of buyback to ROC and SEBI within 30 days of completion
Extinguish/cancel and physically destroy shares brought back within 7
seven of last day of completion of buy back
• Observe cooling period of 6 months [Company shall not make fresh
issue of shares]
• Complete all buyback formalities within 1 year of passing SR in
GM/BR in BM
Section 70-Prohibition of buy-back
• Not allowed in following circumstances
Buy back not allowed through any subsidiary company including its
own subsidiary
Through any investment company/group of investment co.
Co. default in payment of deposits/interest payment/ redemption of
preference shares or redemption of debentures, remedy default and 3
years lapsed after rectifying default
If not complied with
-section 92-annual return
-section 123/127-dividend related
-section 129-preparation of financial statement