Section 68-70 of Companies Companies Act, (Share Capital 2013 - PowerPoint PPT Presentation

Rule 17 of Section 68-70 of Companies Companies Act, (Share Capital 2013 and Debentures) Rules, 2014

Buy Back means purchasing of its own shares or other specified securities* by the company out of:- ( a) its free reserves; ( b) the securities premium account; or ( c) the proceeds of the issue of any shares or other specified securities: Buy back shall not be made out of the proceeds of an earlier • free reserves includes securities premium account. issue of the same kind of shares or same kind • Specified securities includes employees’ stock option or of other specified other securities as may be notified by the Central securities Government from time to time

To increase promoter’s shareholding To prevent takeover To increase earning per share

Company can purchase its own shares • from the existing shareholders or security holders on a proportionate basis; • from the open market; • by purchasing the securities issued to employees of the company pursuant to a scheme of stock option or sweat equity.

Buy Back shall not exceed 25% of the aggregate of paid-up capital and free reserves of the company Provided , in case of buy back of equity shares it shall not exceed in any financial year 25% of the total paid up equity capital

Special Resolution shall Board Resolution shall required to be passed required to be passed in case if the buy-back is more than in case if the buy-back is, 10% or less 10% of the total paid-up equity capital of the total paid-up equity capital and and free reserves of the company free reserves of the company; and such resolution shall be at the such resolution shall be at the meeting of shareholders meeting of Board

It shall be authorized by the articles of the Company The ratio of the aggregate of secured and unsecured debts owed by the company after buy-back is not more than twice the paid-up capital and its free reserves (i.e. 2:1) All the shares or other specified securities for buy-back are fully paid-up Company shall not withdraw the offer once it has announced the offer to the shareholders Company shall not utilize any money borrowed from banks or financial institutions for the purpose of buying back its shares Company shall not utilize the proceeds of an earlier issue of the same kinds of shares or same kind of other specified securities for the buy back

For making offer of buy For completion of buy back back No offer of buy-back shall be made Every buy-back shall be completed within a period of 1 year reckoned from within a period of 1 year from the date the date of the closure of the preceding of passing of the special resolution, or offer of buy-back, if any . Board resolution (as the case may be)

Send the letter of offer to all the shareholders or security holders immediately after it got approved in the shareholder’s meeting or Board meeting as the case may be. Offer for buy-back shall remain open for a period of not less than 15 days and not exceeding 30 days from the date of dispatch of the letter of offer In case if no. of securities/shares offered by the shareholders/securities holders exceeds the total no. of shares to be bought back than acceptance shall be made on proportionate basis company shall complete the verifications of the offers received within 15 days from the date of closure of the offer Shares or other securities lodged shall be deemed to be accepted unless a communication of rejection is made within 21 days from the date of closure of the offer

• deposit therein, such sum, as would make up the entire company shall immediately sum due and open a separate bank • payable as consideration for the shares tendered for buy- back account Company shall within 7 • make payment of consideration in cash whose securities have been accepted; or days from the date it • return the share certificates whose securities have not completes the verification been accepted at all or the balance of securities in case of part acceptance of offer received Company shall extinguish & • within seven days of the last date of completion of buy- back physically destroy the shares or securities so bought back

The company which has been authorized by a special resolution shall file with the Registrar:- • a letter of offer in Form No. SH.8 • It shall be signed by at least 2 directors of the company, 1 of whom shall be the managing director • a declaration of solvency in Form No. SH.9 • it shall be signed by at least 2 directors of the company, 1 of whom shall be the managing director and verified by an affidavit The company which has been authorized by a Board resolution shall file with Registrar:- • a declaration of solvency in Form No. SH.9 • It shall be signed by at least 2 directors of the company, 1 of whom shall be the managing director and verified by an affidavit The Company shall file a return of buy back • After completion of buy back, company shall file a return in form SH-11 along with the certificate in form no. SH-15 • It shall be signed by two directors, including the Managing Director.

Entries in register • Company, shall maintain a register of shares or other securities in Form No. SH.10. • Register shall be maintained at the registered office of the company • The entries in the register shall be authenticated by the secretary of the company or by any other person authorized by the Board for the purpose. Disclosure in Balance sheet • Where a company purchases its own shares out of free reserves or securities premium account, a sum equal to the nominal value of the shares so purchased shall be transferred to the capital redemption reserve account and details of such transfer shall be disclosed in the balance sheet.

Company shall not directly or indirectly purchase its own shares or other specified securities — • through any subsidiary company including its own subsidiary companies; • through any investment company or group of investment companies; or Company should not buy-back its own shares or other specified securities if — • Default subsists in repayment of deposits accepted either before or after the commencement of this Act, interest payment thereon, redemption of debentures or preference shares or payment of dividend to any shareholder, or repayment of any term loan or interest payable thereon to any financial institution or banking company. ( provided buy back is not prohibited, if the defaults is remedied and a period of 3 years has lapsed after such default ceased to subsist.) • Defaulted in relation to preparation and filing of its Annual Return. • Default in relation to payment of Dividend to any equity or preference shareholders. • Default in preparation of financial statements

If a company makes any default in complying with the provisions of section 68 or in case of listed company of any regulation made by the Securities and Exchange Board:- • the company shall be punishable with fine which shall not be less than 1 lakh rupees but which may extend to 3 lakh rupees and • every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to 3 years or with fine which shall not be less than 1 lakh rupees but which may extend to 3 lakh rupees, or with both.