Buy back of equity shares of private limited company

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Zohar Rangwala (Querist)
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01 February 2013 is it necessary to consider last audited balance sheet for calculating the amt. available for buy back of equity shares of a private limited company

Ajay Mishra

Ajay Mishra (Expert)
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01 February 2013 Hi

The following terms and conditions are required to be fulfilled by a company in order to become eligible to buy-back its own securities:—

(a) There must be a provision in the Articles of Association authorising the company to buy-back its own shares, otherwise the Articles must be amended by a special resolution to incorporate a suitable provision.
(b) A special resolution must also be passed in a general meeting of the company authorising the Board of directors to buy-back the shares of the company or other specified securities. Upto 25% of the total paid-up capital and free reserves provided that the buy-back of equity shares in any financial year shall not exceed 25% of its total paid-up equity capital in that financial year.
(c) The maximum quantum of buy-back can be upto 10% of the total paid up capital and free reserves by the authority of the Board by means of resolution of the Board meeting.
(d) After the buy-back, the debt of the company namely the amount of secured and unsecured debts shall not be more than twice the paid-up capital and free reserves.
According to Notification GSR 479(E) issued by the DCA on 12th June, 2005, the debt equity ratio for listed Housing Finance Companies for the purposes of clause (d) of sub-section (2) of section 77A shall be such as may be specified by the National Housing Bank being the regulator, in consultation with the Central Government.
(e) All the shares or other specified securities involved for buy-back must be fully paid-up.
(f) The buy-back of the shares or other specified securities, if listed in any stock exchange, must be carried out in accordance with the regulations framed by the Securities and Exchange Board of India.
(g) The buy-back of the shares or other specified securities, if any of the private company and unlisted public company shall be made as per the guidelines issued by the Government.
(h) The explanatory statement sent to members along with the notice for passing the special resolution referred to in clause (b) above shall contain all relevant information.

Zohar Rangwala

Zohar Rangwala (Querist)
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01 February 2013 Thanks for the answer
But this is not the reply to my question.
what are the fig that need to be taken for calculating the limit for buy back
should it be from the last audited balance sheet or do we need to prepare the balance sheet as on the date of buy back

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Ajay Mishra

Ajay Mishra (Expert)
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01 February 2013 Read Point No. b for clarification. Calculation is based on financial year.