- Pre Buy-Back Compliances
The following points should be considered before taking the decision
of buy-back of shares of the company:
i. The buy-back is authorized by the articles
of the company; if not, the articles of association to amend accordingly
by passing the special resolution.
ii. Percentage of Buy Back of shares should not
exceed 25% of the aggregate of the paid up capital and free reserves of
the company.
iii All the shares or other specified
securities for buy back should be fully paid up.
iv The buy-back should be made through
any of the following modes:
1. From the existing shareholders or
security holders on a proportionate basis
2. From the open Market
3. By purchasing the securities issued
to employees of the company pursuant to a scheme ofSTOCK OPTION or sweat equity.
v. The buy-back should be made only out of –
Free
Reserves; or
The
Securities Premium Account; or
The
proceeds of the issue of any shares or other specified securities
Note: No buy-back
of any kind of shares or other specified securities shall be made out of the
proceeds of an earlier issue of the same kind of shares or same
kind of other specified securities.
vi. Where
the company opts to go for buy back out of free reserves/securities premium
account a sum equal to nominal value of the shares so
purchased shall be transferred to the capital redemption reserve account
and details of the same shall be disclosed in balancesheet.
vii. Ratio
of the aggregate of secured and unsecured debts owed by the company after buy
back should not be more than twice the paid up capital and
free reserves (Debt Equity Ratio shall not be more than 2:1).
viii. If
the buy-back is to be made of the shares or other specified securities which
are listed on any recognized STOCK EXCHANGE then follow
the regulations made by SEBI in this behalf.
ix
Every Buy back shall be completed within a period of one year from the
date of passing of the Board or Special resolution as the
case may be.
x. No offer of buy-back shall be made within a
period of one year reckoned from the date of closure of the preceding offer of
buy-back,if any.
xi The offer shall not be withdrawn once it has
announced it to the shareholders.
xii Any borrowed money from banks/ financial
institutions shall not be utilized for the purpose of buy back.
- If the proposed Buy back is ten percent or less of the total paid-
up share capital and free reserves of the company
Step 1: Convene a Board Meeting after
giving notice to all the directors under section 173 of the Companies Act 2013
to pass the necessary resolution and to approve the letter of offer.
Step 2: File Form MGT-14 within 30 days of
passing board resolution.
Step 3: File a Declaration of solvency in Form
No. SH.9 with the Registrar of Companies and SEBI, if listed, along
with the letter of offer and verified by affidavit to the effect as prescribed
in sub-section 6 of Section 68.
Note: Declaration of solvency shall be signed by
at least 2 directors one of whom shall be the Managing Director, if any.
Step 4: Dispatch the Letter of offer to the shareholders/security
holders within 21 days from its filing with the Registrar of
Companies ensuring the matters as prescribed in the Sub-rule 10 of Rule 17 of
The Companies (Share Capital and Debentures) Rules, 2014.
Step 5: The offer for buy back shall remain open for
a minimum period of 15 days but not more than 30 days from the date of dispatch
of letter of offer.
Step 6: In case the number of shares or other specified
securities offered by the shareholders or security holders is more than the
total number of shares or securities to be bought back by the company, the
acceptance per shareholder shall be on proportionate basis out
of the total shares offered for being bought back.
Step 7: Complete the verifications of the
offers received within 15 days from the date of closure of
offer.
Step 8: Open a separate bank account immediately
after the date of closure of the offer and deposit such sum as would
make the entire sum due and payable as consideration for the shares to be
bought –back
Step 9: Within 7 days from the date of verification of
the offers:
i. Make payment of consideration in cash to
those shareholders/ securities whose securities have been accepted.
ii. Return the share certificates to those
shareholders/security holders whose shares/securities are not accepted at all
or the balance of securities in case of part acceptance.
Step 10: Extinguish and physically destroy the
shares/ other specified securities bought back within 7 days of
the last date of completion of buy back.
Step 11: File the Return of Buy back with the Registrar
in Form No SH.11 and SEBI, if listed, on
completion of buy back along with the certificate in Form No SH.15 signed
by two Directors one of whom shall be Managing Director, if any, certifying
that the buy-back of securities has been made in compliance with the provisions
of the Act and rules within 30 days of such completion.
Step 12: Maintain a register of bought- back Shares
/other securities in Form No SH-10 at the registered office of
the Company and keep in the custody of company secretary or any other person
authorized by the Board in this behalf and the entries shall be authenticated
by company secretary or any other person authorized by the
Board.
- If the proposed Buy back is more than ten percent but less than 25
percent of the total paid- up equity share capital and free reserves of
the company
Step 1: Convene
a Board Meeting after giving notice to all the directors under section
173 of the Companies Act 2013 to pass the necessary resolution and approve the
notice of general meeting of the company and letter of offer for buy-back.
Note: The
Explanatory statement under section 102 as annexed to the notice calling
general meeting shall disclose the particulars as specified in section 68 (3)
Read with Rule 17 (1).
Step 2:
File Form MGT-14 within 30 days of passing board resolution.
Step 3: Convene
a General Meeting and pass the necessary special resolution and file Form
MGT-14 to the Registrar within 30 days of passing the resolution.
Step 4: File
letter of offer in Form No. SH.8 with Registrar of Companies
which must be dated and signed by at least 2 directors one of whom shall be the
Managing Director, if any.
Step 5:
File a Declaration of solvency in Form No. SH.9 with the
Registrar of Companies and SEBI, if listed, along with the letter of offer and
verified by affidavit to the effect as prescribed in sub-section 6 of Section
68.
Note: Declaration of solvency shall be signed by
at least 2 directors one of whom shall be the Managing Director, if any.
Step 6:
Dispatch the Letter of offer to the shareholders/security holders within
21 days from its filing with the Registrar of Companies ensuring the
matters as prescribed in the Sub-rule 10 of Rule 17 of The Companies (Share
Capital and Debentures) Rules, 2014.
Step 7: The
offer for buy back shall remain open for a minimum period of
15 days but not more than 30 days from the date of dispatch of letter of offer.
Step 8: In case
the number of shares or other specified securities offered by the shareholders
or security holders is more than the total number of shares or
securities to be bought back by the company, the acceptance per shareholder
shall be on proportionate basis out of the total shares
offered for being bought back.
Step 9: Complete
the verifications of the offers received within 15 days from
the date of closure of offer.
Step 10: Open
a separate bank account immediately after the date of closure of the
offer and deposit such sum as would make the entire sum due and
payable as consideration for the shares to be bought –back
Step 11:
Within 7 days from the date of verification of the offers:
i.
Make payment of
consideration in cash to those shareholders/ securities whose
securities have been accepted.
ii.
Return the
share certificates to those shareholders/security
holders whose shares/securities are not accepted at all or the balance of
securities in case of part acceptance.
Step12: Extinguish
and physically destroy the shares/ other specified securities bought
back within 7 days of the last date of completion of buy back.
Step 13: File
the Return of Buy back with the Registrar and SEBI, if listed, in Form
No SH.11 on completion of buy back along with the certificate in Form
No SH.15 signed by two Directors one of whom shall be Managing
Director, if any, certifying that the buy-back of securities has been made in
compliance with the provisions of the Act and rules within 30 days of such
completion.
Step 14:
Maintain a register of bought- back Shares /other securities in Form
No SH-10 at the registered office of the Company and keep in the
custody of company secretary or any other person authorized by the Board in
this behalf and the entries shall be authenticated by company
secretary or any other person authorized by the Board.
- Post Buy Back Compliances:
1. A company shall not make a further issue of the same kind
of shares/other securities including allotment of new shares under section 62
(1) (a) or other specified securities within a period of 6 months except by way
of bonus issue or in the discharge of subsisting obligations such as conversion
of warrants, STOCK OPTION schemes, sweat equity or conversion of preference
shares or debentures into equity shares.
2. The Company shall not issue any new shares including
bonus shares from the date of passing special resolution till the date of
closure of the offer for buy back except those arising out of any convertible
instruments.
- Prohibitions for Buy-Back :
1.A company shall not directly or indirectly purchase its
own shares or other specified securities—
(a) through any subsidiary company including its own
subsidiary companies;
(b) through any investment company or group of investment companies; or
(c) If default is made in
i. repayment of deposits accepted either before
or after the commencement of this act, interest payment thereon,
ii redemption of debentures or preference
shares
iii payment of dividend to any shareholder, or
iv. repayment of any term loan or interest
payable thereon to any financial institution or banking company.
Note: Buy back is not prohibited, if the
default is remedied and a period of three years has lapsed from the date of
making good the default.
2. If the company has not complied with the provisions of :
i. Section 92 (Annual
Return),
ii. Section 123 (declaration of
dividend),
iii. Section 127 (punishment
for failure to distribute dividends) and
iv. Section 129 (Financial
statements
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