Tag Archives: Buyback

Amendment in Buyback Law


The Ministry of Corporate Affairs bring out two draft notifications to be published in Official Gazette of India to amend the Act by a draft order under proviso to Section 68(2)(d) and by a draft amendment in the Companies (Share Capital and Debentures) Rules, 2014.

Post Buyback Debt – Equity Ratio:

As we discussed earlier here, Section 68(2)(d) read as under:

“The ratio of the aggregate of secured and unsecured debts owed by the company after buy-back is not more than twice the paid-up capital and its free reserves:

Provided that the Central Government may, by order, notify a higher ratio of the debt to capital and free reserves for a class or classes of companies;”

Now draft notification read as under:

In exercise of the powers conferred under the proviso to clause (d) of sub-section (2) of section 68 of the Companies Act, 2013, the Central Government has notified that –

The debt to capital and free reserves ratio shall be 6:1 for government companies within the meaning of clause (45) of Section 2 of the Companies Act, 2013 which carry on Non Banking Finance Institution activities and Housing Finance activities.

This order give effect that for all companies post buyback Debt Equity Ratio shall be 2:1 except government companies which are Non banking Finance companies or Housing Finance companies.

Unaudited Accounts limited reviewed:

As we discussed earlier here, Rule 17(1)(n)(iii) of the companies (Share Capital and Debentures) Rules, 2014 read as under:

“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;”

The draft of the companies (Share Capital and Debentures) Amendment Rules 2016 insert following proviso to this sub – clause:

“Provided that where the audited accounts are more than six months old, the calculations with reference to buy back shall be on the basis of un-audited accounts not older than six months from the date of offer document which are subjected to limited review by the auditors of the company.”

This is a removal of practical difficulty. Due to present clause, for practical purpose buyback resolution is possible only within six month from date of audited annual account. Now, buyback resolution may be possible any time on the basis of unaudited accounts limited reviewed by the auditors of the company.

Please note: This blog invite readers to share their comments, suggestions, hardship, queries and everything in comment section. This blog post is not a professional advice but just a knowledge sharing initiative for mutual discussion.

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RETURN IN RESPECT OF BUYBACK OF SECURITIES


The company is required to file a return of buyback as discussed earlier here. The Return shall be filed in Form SH – 11.

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REGISTER OF BOUGHT-BACK SECURITIES


The Register of shares and other securities bought back shall in Format given in
Form SH – 10. We have discussed rules related to Register of bought back securities earlier here.

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DECLARATION OF SOLVENCY FOR BUYBACK


Form SH – 9 is a declaration for solvency related to buyback of securities. We have discussed rules related to declaration of solvency earlier here. Here, we will discuss contents of the declaration.

Following information is required to be given in this form:

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FORMAT FOR LETTER OF OFFER FOR BUYBACK


Letter of offer for buyback is a E – form to be filed with the Registrar of Companies as discussed by this blog earlier here. Form SH – 8 is format for Letter of offer.

The company need to fill in this form following important information:

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LETTER OF OFFER 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. In last post, we have discussed approval of the company through Special Resolution for buyback.

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.

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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.

Continue reading