Buy back of shares

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shweta shah (Querist)
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09 May 2012 Dear Sir/Mam,

With regards to Buyback of Shares under Companies Act, 1956 kindly let us know that can the private limited companies buyback the shares if they are having sufficient free reserves but insufficient cash???? and also let us know on what grounds can buyback be rejected by the concerned authorities?

Kindly reply for the same as soon as possible.

Thanking you
Shweta Shah

CS Mitesh Mehta

CS Mitesh Mehta (Expert)
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10 May 2012 Dear Shweta,

Private company can very well buyback the shares from its free reserve.

Free reserves mean those reserves which as per the latest audited Balance Sheet are free for distribution of dividend and shall include the amount to the credit of securities premium account and balance kept in the Profit and Loss Account. The share application amount and revaluation reserve will not form part of free reserve.

Further company should follow Private Limited Company and Unlisted Public Limited
Company (Buy-Back of Securities) Rules, 1999 updated from time to time along with Section 77A of the Companies Act to avoid any rejection.

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shweta shah

shweta shah (Querist)
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11 May 2012 Thankyou for your guidance..... and your helping hand.

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