RESOLUTION FOR BUY-BACK OF SHARES OR OTHER SECURITIES


Buyback is an important provision related to Share Capital of a company. We discussed provisions related to buyback under the Companies Act 2013 earlier here.

Rule 17 of the Companies Act set out norms for buyback of securities by the private companies and unlisted public companies. Rule 17 shall read with Section 67 – 70 of the Companies Act 2013.

Explanatory Statement:

The explanatory statement to be annexed to the notice of the general meeting pursuant to section 102 shall contain the following disclosures, namely:-

(a) The date of the board meeting at which the proposal for buy-back was approved by the board of directors of the company;

(b) The objective of the buy-back;

(c) The class of shares or other securities intended to be purchased under the buy-back;

(d) The number of securities that the company proposes to buy-back;

(e) The method to be adopted for the buy-back;

(f) The price at which the buy-back of shares or other securities shall be made;

(g) The basis of arriving at the buy-back price;

(h) The maximum amount to be paid for the buy-back and the sources of funds from which the buy-back would be financed;

(i) The time-limit for the completion of buy-back;

(j) Shareholding details:

(i) The aggregate shareholding of the promoters and of the directors of the promoter, where the promoter is a company and of the directors and key managerial personnel as on the date of the notice convening the general meeting;

(ii) The aggregate number of equity shares purchased or sold by persons mentioned in sub-clause (i) during a period of twelve months preceding the date of the board meeting at which the buy-back was approved and from that date till the date of notice convening the general meeting;

(iii) The maximum and minimum price at which purchases and sales referred to in sub-clause (ii) were made along with the relevant date;

(k) If the persons mentioned in sub-clause (i) of clause (j) intend to tender their shares for buy-back –

(i) The quantum of shares proposed to be tendered;

(iii) the details of their transactions and their holdings for the last twelve months prior to the date of the board meeting at which the buy-back was approved including information of number of shares acquired, the price and the date of acquisition;

(l) A confirmation that there are no defaults subsisting in repayment of deposits, interest payment thereon, redemption of debentures or payment of interest thereon or redemption of preference shares or payment of dividend due to any shareholder, or repayment of any term loans or interest payable thereon to any financial institution or banking company;

(m) A confirmation that the Board of directors have made a full enquiry into the affairs and prospects of the company and that they have formed the opinion-

(i) That immediately following the date on which the general meeting is convened there shall be no grounds on which the company could be found unable to pay its debts;

(ii) As regards its prospects for the year immediately following that date, that, having regard to their intentions with respect to the management of the company’s business during that year and to the amount and character of the financial resources which will in their view be available to the company during that year, the company shall be able to meet its liabilities as and when they fall due and shall not be rendered insolvent within a period of one year from that date; and

(iii) The directors have taken into account the liabilities (including prospective and contingent liabilities), as if the company were being wound up under the provisions of the Companies Act, 2013

(n) A report addressed to the Board of directors by the company’s auditors stating that-

(i) They have inquired into the company’s state of affairs;

(ii) The amount of the permissible capital payment for the securities in question is in their view properly determined;

(iii) That the audited accounts on the basis of which calculation with reference to buy back is done is not more than six months old from the date of offer document; and

(iv) The Board of directors have formed the opinion as specified in clause (m) on reasonable grounds and that the company, having regard to its state of affairs, shall not be rendered insolvent within a period of one year from that date.

Form for buyback:

The company which has been authorized by a special resolution shall, before the buy-back of shares, file with the Registrar of Companies a letter of offer in Form SH – 8, along with the fee.

The letter of offer shall be dated and signed on behalf of the Board of directors of the company by not less than two directors of the company, one of whom shall be the managing director, where there is one.

Letter of Offer:

The company shall file with the Registrar, along with the letter of offer, and in case of a listed company with the Registrar and the Securities and Exchange Board, a declaration of solvency in Form SH – 9 along with the fee and signed by at least two directors of the company, one of whom shall be the managing director, if any, and verified by an affidavit as specified in the said Form.

Please note: I welcome your comments and feedback. This blog post is not a professional advice. Readers may share this post on social media by using buttons given here.

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3 responses to “RESOLUTION FOR BUY-BACK OF SHARES OR OTHER SECURITIES

  1. Pingback: Index of Companies Law Posts | AishMGhrana

  2. Pingback: Amendment in Buyback Law | AishMGhrana

  3. Pingback: LETTER OF OFFER FOR BUY-BACK OF SHARES OR OTHER SECURITIES | AishMGhrana

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