TOPIC 20: QUICK REFERENCE TO “Buy - Back of Shares”

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Quick Reference to " Buy - Back of Shares" :-
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(Few Important Aspects Only ).

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Legal Provision:-

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Section 68, 69, 70 of Companies Act, 2013.

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Rule 17 of Companies ( Share Capital and Debenture ) Rules, 2014.

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SEBI ( Buy- Back of Securities ) Regulation, 1998.
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1. Meaning:-
In simple Words, It means Purchase of Own Shares by the company.
Earning Per share will increase Due to Buy-Back of Shares.

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2. Limit:-
With Board Resolution:-
Upto 10% of Total paid - up equity capital & Free reserves.
With Special Resolution
@ General Meeting :-
Upto 25 % of Paid up capital & Free Reserves of the Company.

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* But Buy-Back of equity Shares should not be more than 25 % of Total paid up Equity Capital of Company.

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3. Points:-

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# There should be a Buy-back of Fully paid up Shares only .

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# Statutary Reserves, CRR, DRR will not be used for Buy-back of Shares.

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# Sources:-
a) Free reserves;
b) Securities premium account;
c) The proceeds of the issue of any shares or other specified securities.

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# No buy-back of any kind of shares or other specified securities shall be made out of the proceeds of an earlier issue of a same kind of shares.

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# AOA authorization is Mandatory.

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# Debt equity ratio should be 2:1.

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# 1 years interval / Gap is required between 2 Buy-back of Company.

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# Buy-back shall be Completed within 1 year from the date of passing respective Resolution.

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Any issue of Shares or Securities within 6 months from the end date of completion of Buy-back is not allowed except in case of Bonus- Shares, Sweat equity Shares, Conversion of preference Shares, Conversion of Debentures.

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# In case of Listed Company, Buy-back can be through Reverse Book- building method or Through Open market.

4.For Listed Companies in reverse book building method:-

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∆ Buy-back shall remain open for 15-30 days.
∆ Alteast 30 bidding Centres.
∆Appointment of Merchant banker is mandatory.

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Regards
ACA SOURAV BAGARIA