Query - Buy Back

The company can buy back its own shares upto the limit of 10% of its paid up capital and free reserves in the Board Meeting. However, it required the consent of Shareholders by way of Special Resolution if the Buy Bank is more than 10% and upto 25% of its paid up capital and free reserves.

The company Can not buy back its shares more than 25% of its paid up capital and free reserves.

Terms and conditions to be complied before buy-back

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 (Appendix 1) 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 (now MCA) on 12th June, 2005, the debt equity ratio for listed Housing Finance Companies for the purposes of clause (d) of subsection (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.

Procedure of Buy Back

1. Hold a Board Meeting and pass a resolution for buying-back its securities. Approve the following documents:

(i) Scheme for buy-back as contained in Letter of Offer.

(ii) Explanatory statement containing disclosures specified in Schedule I to the above Rules.

(iii) Notice for calling a general meeting.

(iv) Record date for buy-back offer.

(v) The Board will also approve the Declaration of Solvency. It shall be prepared in Form 4A of the Companies (Central Government's) General Rules and Forms, 1956 (See Appendix 4) and be verified by an affidavit, and signed by at least two directors of the company, one of whom shall be the managing director as required to be done by section 77A(6).

2. Company cannot give any specific offer to a particular member for buy-back of shares, it is required to give Letter of Offer to all the existing members, therefore, there should not be any specific name in the resolution or explanatory statement.

3. Convene a general meeting and pass a special resolution 77A(2) for buy back of shares.

4. Filing of e-Form 23 electronically with the concerning Registrar of Companies.

5. Preparation and approval of the Board for letter of offer for buy-back of shares.

6. Fixing the record date for buy-back offer.

7. Filing of letter of offer with the concerned Registrar of Companies alongwith the declaration of solvency attached with the e-Form 62 before dispatching of the same to the members.

8. Dispatch the letter of offer to all the members within 21 days from the date after filing with the Registrar.

9. Maintain a register for letter of offer dispatched.

10. The letter of offer shall be open for exercise for not less than 15 days and not more than 30 days from the date of dispatch of letter of offer.

11. After verification of option, finalise the buy-back of shares within 14 days from the date of the closure of letter of offer. If the option have been exercised by the members for higher number of shares than the offer have been made, then it shall be accepted by the company proportionately. If company has not rejected any application within 21 days from the closure of the letter of offer it will be deemed to have been accepted.

12. Open immediately a separate bank account and deposit the entire amount in that account.

13. Make payment of consideration within 7 days from the finalising of the buy-back.

14. Maintain a register for buy-back of shares and make entries for destroying of the shares bought back.

15. Destroy all the share certificates within 7 days, in presence of a Practising Company Secretary, from the completion of buy-back.

16. Submit a certificate, obtained from two directors of the company and a company secretary in whole time practice for completion and destruction of shares, with the Registrar.

17. File a return of buy-back in e-Form 4C2 electronically with the Registrar.

18. If buy-back has been out of free reserves, a sum equal to the nominal value of securities bought back shall be credited in Capital buy-back reserve account. This account can be utilized for issue of fully paid-up bonus shares.

19. Payment for buy-back shall be made in cash only.

hello ankur sir, do you copy all these procedures and all that from some where or type here manually. Can you please provide me your cell no. please

Sir,

Reliance buy back offer is Rs.870.After exhausting this offer can they go for another buy back offer.

After this offer is over what may be the price of the shares.will it increase or decrease. If increase  happy. But if decreases will it be better to sell the shares now. Now  reading the present position RADG group shares are falling.Is it good move to come out from this group shares.

We small investors are in the mist of confusion.Any advice is very much needed.