Buy Back of Share

Pvt ltd 5567 views 4 replies

Dear Sir,

Company 'A"  is a private limited company registered unde companies act 1956.

"A"   wants to buyback its own shares already alloted to shareholders Xx, Xy, X z,   

Paid up capitals are

XA- 2000 Share  of 10/- each  

XB-2000 Shares of 10/- each

XC-3000 Shares of 10/- each

Xx- 5000 share of   10/- each

Xy- 6000 Share of 10/- each

Xz- 10000 shares of 10/- each

Reserves & surplus( Incl Share premium) are Rs. 2.85 Crores

 

Can it buy back the same from its own resources.

If yes let me provide the detailed proceedings

thanks.

Replies (4)
Read Private Companies Buy Back rules.

Yes, it can be bought back out of--

 

(i) Free Reserves

 

(ii) securities premium account

 

(iii) proceeds of fresh issue

Process for Buyback:

 

  1. Buyback is permissible out of Free reserves or securities premium account or proceeds of and shares or securities (not being of the class under buyback)
  2. Check authorisation in Articles of Association if not amend Articles of Association
  3. If buyback is of 10% of paid up capital and free reserves no special resolution by members is required only Board approval is required at its meeting (also see section 292)
  4. Any buyback approved by Board shall be completed with in 365 days of the offer
  5. Buy back shall not exceed 25% of the paid up capital and free reserves
  6. Buyback shall not exceed 25% of the equity shares in a financial year
  7. Check shares under buyback are fully paid up
  8. D/E ratio to be 2:1 after buyback
  9. Explanatory statement to the Notice of EGM seeking approval for buyback to state details as per Schedule –I to The Private Limited Company and Unlisted Public Limited Company (Buyback of Securities) Rules, 1999(Rules).
  10. File draft letter of offer containing particulars as per Schedule – II to Rules, with ROC. Once filed with ROC, the offer is binding on company cannot be withdrawn
  11. Offer letter to confirm about opening of bank account, availability and earmarking of funds
  12. Send Letter of offer to shareholders not later than 21 days of filing draft letter of offer with ROC
  13. Offer to remain open for not less than 15 days and not more than 30 days from the date of despatch of the same to the shareholders
  14. Proportionate acceptance if application is more than offer
  15. Complete verification of the applications within 15 days after the closure of offer
  16. Deemed acceptance if not rejected with in 21 days of the closure of offer
  17. On closure of offer open a special bank account and deposit the entire consideration
  18. Within 7 days of completion of verification of the applications, pay by PO or DD or cash regarding the accepted applications and return share certificates regarding rejected applications
  19. Buyback to be completed with in 12 months from the date of Special Resolution or Board Resolution
  20. Approve Declaration of Solvency (rule 5C, form 4A, CGR & F) at a Board meeting, signed by two directors (one MD if any) and file it with ROC before completion of buyback.
  21. Within 7 days of completion of buyback, extinguish and destroy physical certificates in presence of Practicing CS (PCS),
  22. File with ROC within 7 days of completion of buyback, a certificate of extinguishment verified by two directors (WTD and MD if any) and PCS
  23. Maintain a record of cancellation of share certificates within 7 days of completion of buyback
  24. No further issue of same kind of securities bought back for 6 months after completion of buyback, except by way of bonus issue or conversion of warrants, preference shares or debentures into equity shares
  25. Maintain register of securities bought back and enter details of date of cancellation of securities, consideration, date of destroying physical certificates as per Annexure B to the Rules (Also see rule 5C and form 4B, CGR & F)
  26. File with ROC return of buyback within 30 days of  completion of buyback as per Annexure A to the Rules (Also see rule 5C and form 4C, CGR & F)
  27. If buyback out of free reserves, transfer the amount of securities so purchased shall be transferred to CRR (see proviso to section 80(1)) and disclose in balance sheet.
  28. No buyback through subsidiary companies, investment companies, if in default of repayment of deposits, interests, dividend etc . and provisions of sections 159, 207 and 211.

HI,

Ms Jayashree has already provided the detailed procedure on buy-back and also stated at point no. 6 that  Buyback shall not exceed 25% of the equity shares in a financial year, accordingly Company A can't buy back the shares exceeding 7000 equity shares of Rs. 10 each (i.e. 25% of total equity shares of 28,000 ) in one financial year and as per your query, you will have to repeat the process for 3-4 finacial years to buy back the desired number of equity shares.

Regards

CS Ashwini Kumar


CCI Pro

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