The company can buyback its securities from-
1. Free Reserve
2. Securities Premium Account
3. Proceeds of fresh issue of shares
Conditions a company needs to comply for buying back its shares-
1. Authorization in Articles required.
2. The buyback authorized by passing resolution (BR) in board meeting only if –
a) buyback <(10% of aggregate of Paid-up Equity Capital + Free Reserve)
3. The buyback authorized by passing special resolution only if-
a) Buyback <(25% of aggregate of Paid Up Equity Capital + Free Reserve + Security
a) Buyback <(25% of Total Paid Up Equity Capital)
b) Post Debt Equity ratio must not exceed 2:1
4. In case of Listed Company, the company shall comply with the regulations made by SEBI. In case
of Unlisted Company the company shall comply the rules prescribed by CG
5. Before Buyback, the securities must be fully paid up.
6. The buyback can be done from-
a) The existing share holders on proportionate basis
b) The open market
c) From the employees by way of stock option or sweat equity
7. Buyback comply- within 1 year of passing SR/BR
8. Time between two buyback- 1 year
9. Company shall file with the registrar a declaration of solvency within 1 year (in case of listed
company this declaration of solvency shall be filed to SEBI too)
10. Company shall extinguish and physically destroy the shares bought back within 7 days of
completion of buyback.
11. After completion of buyback, the company shall within 30 days file a return of buyback. The
return shall be filed with ROC in case of unlisted company and to ROC and SEBI in case of
12. The company shall not make further issue of same kind of security within next 6 months except
by way of-
a) Bonus shares
b) Issue of shares in discharge of subsisting obligation.
13. The company shall maintain a register with the following particulars-
a) The security bought back
b) The consideration paid for the security bought back
c) The date of cancellation of securities
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