Buy Back of Shares as per companies Act 2013

Buy Back of Shares as per companies Act 2013


Meaning: Buy Back of shares means Company buying its own shares from existing shareholders

Applicable Sections under Companies Act 2013: Section 68, 69, 70, 110, 117

Applicable Rule: Rule 17 of Companies (Share Capital & Debenture) Rules 2014 for Private Companies and unlisted Public Companies

Conditions for Buy Back: 

1. Buy Back is authorized by its articles
2. Board Resolution if buy back is upto 10% of paid up equity capital and free reserves
3. Special Resolution if buy back is upto 25% of paid up equity capital and free reserves
4. ratio of secured & unsecured debts after buy back is not more than 2 (paid up capital & free reserves)
5. shares are fully paid up

Prohibitions:

Buy back is prohibited through acquisition by Subsidiary Company, Investment Company, Company who has defaulted in repayment of deposits and interest thereon.

Checklist

1. AOA authorise for Buy Back of Shares

2. Maximum Buy Back can be 25%(Paid up Capital +Free Reserves)

3. A letter of offer in SH 8 shall be filed with ROC & copy to Shareholders simultaneously+ A declaration of solvency in SH 9 + Affidavits

4.  offer for buy back shall remain open for at least 15 days to 30 days

5. company shall complete verification of shareholders consent within 15 days of closure of offer

6.within 7 days make payment to shareholders after verification

7. Register of buy back shall be maintained

8.After buy back SH 11 +SH 15 shall be filed with ROC

9. Separate bank account shall be opened by company adequately funded for this purpose.

10. In balance sheet, a sum equal to nominal value of shares purchased shall be transferred to capital redemption reserve account

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