Step-by-Step Guide to Share Buyback Compliance Under Companies Act, 2013

Rule 17 of The Companies (Share Capital and Debentures) Rules, 2014 (including any statutory modification and re-enactment thereof, for the time being in force)

As per the provisions contained in the Articles of Association of the Company

 a) Authorisation in Article of Association

b) Maximum 25% of paid up share capital can be brought back in a financial year.

c) Post buy-back debt-equity ratio cannot exceed 2:1.

d) Only fully paid up shares can be brought back in a financial year.

e) A Company should extinguish and physically destroy shares bought back within 7 days of completion of the buy-back.

f) No offer of buy-back should be made by a company within a period of one year from the date of the closure of the preceding offer of buy-back.

g) The buy-back should be completed within a period of one year from the date of passing of Special Resolution or Board Resolution, as the case may be.

a) Through any subsidiary including its own subsidiaries;

b) Through investment or group of investment Companies;

c) When Company has defaulted in repayment of deposits or interest payable thereon, or in redemption of debentures or preference shares or repayment of any term loan. The prohibition is lifted if the default has been remedied and a period of 3 years has elapsed after such default ceased to subsist.

d) When Company has defaulted in filing of Annual Return, declaration of dividend & financial statement.

Start with the ROC procedure by checking if AOA of the Company authorize buy- back. If no, then alter AOA of the Company.

In case the buyback is 10% or less of the total paid-up capital and free reserves of the company, such buyback shall be authorized by the board by passing a resolution at its meeting.

 If number of buyback of shares is exceeding 10% but 25% or less of the company’s paid-up equity capital and free reserves, Issue Notice of General Meeting at which special resolution to be passed accompanied by Explanatory statement stating-

(a) a full and complete disclosure of all material facts;

(b) the necessity for the buy-back;

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

(d) the amount to be invested under the buy-back; and

(e) the time-limit for completion of buy-back.

May be called at shorter notice than 21 clear days if consent is obtained from members entitled to vote.

After passing Special Resolution, company shall file e-form MGT-14 with ROC.

The company shall, before buyback of shares, file with the Registrar of Companies a letter of offer signed by 2 Directors in Form No. SH.8.

The company shall file with the ROC, along with letter of offer, a declaration of solvency in e-form SH-9.

To be signed by at least two directors and verified by an affidavit

The offer for buy-back shall remain open for a period of not less than fifteen days and not exceeding thirty days from the date of dispatch of the letter of offer.

Provided that where all members of a company agree, the offer for buy-back may remain open for a period less than fifteen days.

•  Complete verification of offer within 15 days of offer closure.
• Deposit the buy-back amount in a separate bank account.
• Make payments or return share certificates whose securities have not been accepted at all within 7 days.

•  No new shares shall be issued during the buy-back period.
• No withdrawal of the offer once announced.
• Prohibitions on using borrowed funds or proceeds from earlier issues for the buy-back.

The company, shall maintain a register of shares which have been bought-back in Form No. SH.10.

The company, after the completion of the buy-back under these rules, shall file with the Registrar, a return in the Form No. SH.11.