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No private or unlisted public company shall directly or indirectly
purchase its own shares or other specified securities through any
subsidiary company including its own subsidiary companies or through
any investment company or group of investment companies otherwise
than according to the Buy-back Rules, 1999 of MCA. Only fully paid up
shares or securities can be bought back by the company. Further, a
company which has defaulted in-

     repayment of deposit; or

     payment of interest on deposits ; or

     redemption of debentures ; or

     redemption of preference shares; or

     Payment of dividend to any shareholder; or

     repayment of interest or principal to any financial institution or
      bank; or

     Complying with the provisions of section 159 (filing of annual
      return),   section 207 (distribution of dividend within 42 days) or
      section 211(annual accounts) of the Companies Act is not eligible
      to buy back its own securities.


The buy back of securities should be authorised by the Articles of
association of the company. Otherwise, the Articles of Association should
be amended.

Source of buy back

The buy back may be out of the company's free reserves or its securities
premium account or out of the proceeds of any shares or other specified
securities. However, no buy back of any kind of shares or other specified
securities shall be made out of the proceeds of an earlier issue of the
same kind of shares or the same kind of other specified securities.
Methods of buy back

The buy-back may be in either of the following two methods:

1. From the existing shareholders on a proportionate basis through
   private offers, or

2. By purchasing securities issued to employees pursuant to a scheme of
   stock option or sweat equity.

Ceiling on quantum of buy back

The quantum of buy back should be 25% or less of the total paid-up
capital and free reserves of the company. Further, the buy back of equity
share in company or in a financial year should not exceed 25% of the
total paid-up equity capital in the financial year.

Post-buy back debt equity ratio

After the buy back, the ratio of debt (including all amounts of secured
and unsecured debts) should not be more than twice the capital and its
free reserves after such buy-back (i.e. 2:1 ratio).

Time limit for completion of buy back

The buy back Formalities should be completed within 12 months from
the date of passing the board resolution or special resolution as
applicable. If buy-back is not completed within 12 months as aforesaid,
the reasons therefor will have to be stated in the Directors’ Report
[section 217(2B)].

Board Resolution

A Board Resolution should be passed for buy back of securities and for
authorizing convening of a general meeting to pass a special resolution
for buy back of securities.- only 10% being bought back hence no
General meeting resolution applicable

Exemption from passing special resolution

No special resolution is required where the buy back is or less than 10%
of the total paid-up equity capital and free reserves of the company. In
this case, passing of Board Resolution shall be sufficient.

No further "offer of buy back" shall be made within 365 days from the
date of the preceding offer of buy back. The offer of buy-back made in
pursuance of the Board resolution as above is called the "offer of buy-

Issue of notice of general meeting

The notice of the general meeting should be sent to all eligible
shareholders and auditors of the company containing the following

+     Full and complete disclosure of all material facts
+     Necessity of buy back
+     Class of security intended to be purchased under the buy back
+     Amount to be invested under the buy back
+     Time limit for completion of buy back (within 12 months of passing
      the special resolution)
+     Additional disclosures specified in Schedule I to the Private Limited
      Company and Unlisted Public Limited Company (Buy-Back of
      Securities) Rules, 1999.

General Meeting Special Resolutions (Postal Ballot)

The general meeting should accordingly be held and the special
resolution authorizing the buy back of securities should be duly passed.
Listed companies should pass the resolution by Postal Ballot as required
under rule 4A of Postal Ballot Rules, 2001 of MCA.

Filing of e-Form No. 23 with the Registrar of Companies

Within 30 days of passing the special resolution, a return in e-Form No.
23 should be filed with the Registrar of Companies.

Filing of letter of offer and declaration of solvency

Before the buy-back of shares, a draft letter of offer containing the
particulars specified in Schedule II to Buy Back Rules should be filed
with the Registrar of Companies along with a declaration of solvency in
Form No. 4A.

Declaration of solvency and verification

The declaration of solvency should be duly verified by an affidavit to the
effect that the Board has made a full inquiry into the affairs of the
company and formed an opinion that it is capable of meeting its liabilities
and will not be rendered insolvent within a year of its adoption by the
Board. The declaration of solvency should be signed by two directors
including the Managing Director, where there is one.

Dispatch of letter of offer

Immediately after filing with the Registrar of Companies, the letter of offer
should be despatched but in any case not later than 21 days from its
filing with the Registrar of Companies.

Duration of offer

The offer for buy-back shall remain open to the members for a period not
less than 15 days and not exceeding 30 days from the date of despatch of
the letter of offer.

General obligations regarding buy back

The company should duly fulfill the following obligations in connection
with the buy back of securities

a)    Letter of offer       shall   not   contain    untrue/    misleading

The letter of offer shall contain true, factual and material information and
shall not contain any misleading information and must state that the
directors of the company accept the responsibility for the information
contained in such document.

b)    Prohibition on share issue

No issue of shares (including bonus shares) shall be made till the date of
the closure of the offer.

c)    Confirmation in letter of offer regarding opening of bank
      account and funds transfer

Confirmation shall be made in the letter of offer regarding the opening of
separate bank account testifying the availability of funds earmarked for
this purpose.

d) Mode of payment of buy-back consideration

Consideration for buy-back shall be only by way of cash or bank draft
/pay order.

e) Prohibition to withdraw offer

The buy-back offer shall not be withdrawn once the draft letter of offer
has been filed with the Registrar of Companies.

f) Not to use borrowed funds
Funds borrowed from Banks/Financial Institutions should not be utilized
for the purpose of buying-back its shares.

Verification of offers

Within 15 days from the date of closure, the verification of offers received
by the company should be completed. The shares lodged with the
company shall be deemed to have been duly accepted unless
communication of rejection is sent within 21 days of closure of offer.

Proportionate acceptance of offers

In case the number of shares offered by the shareholders is more than
the total number of shares to be bought-back by the company, the
acceptance per shareholder shall be on proportionate basis.

Opening of special bank account

Immediately after the date of closure of the offer, a special bank account
should be opened and a deposit of such sum, as would make up the
entire sum due and payable as consideration for the buy-back in terms of
these rules, should be transferred to the account.

Payment of consideration

Within 7 days of the completion of stipulated verification time, payment
of consideration in cash or bank draft/pay order should be made to those
shareholders whose offer has been accepted.

Return of share certificates in case of non-acceptance of

In case of rejected offers, the share certificates should be returned to the
concerned shareholders forthwith.

Extinguishment of Certificate

Within 7 days from the date of acceptance of the shares, the physical
share certificates so bought back should be extinguished and physically
destroyed in the presence of a Company Secretary in whole-time practice.

Furnishing of certificate of compliance to the Registrar

Within 7 days of the extinguishment and destruction of the certificates, a
certificate, duly verified by two directors including the Managing Director
and the Company Secretary in whole-time practice, certifying compliance
of these rules should be furnished to the Registrar of Companies.
Maintenance of record of share certificates cancelled and

Within 7 days of buy-back of shares, a record of share certificates which
have been cancelled and destroyed should be maintained.

Maintenance of Register of shares bought back

A Register of shares bought-back by the Company should be maintained
in the Form specified at Annexure 'B' OF Buy Back Rules.

Filing of return in e-form 4C

Within 30 days of completion of buy back of securities, a return in Form
4C containing the details of buy back should be filed with the Registrar of

a) Who is to file

This e-Form 4C should be filed by the Managing Director or manager or
secretary of the company and one director. If there is no managing
director or manager or secretary, by two directors of the company.

b) Attachments

The following shall be attached:

+ Description of securities bought back and particulars relating to
   holders of securities as per the format given in e-Form.
+ Copy of the Board Resolution
+ Copy of the Special Resolution.
+ Return as per Annex 'A' of Buy Back Rules

Transfer to capital redemption reserve account

Where the buy back of shares is made out of the free reserves of the
company, a sum equal to the nominal value of shares so purchased
should be transferred to the capital redemption reserve account. The
details of such transfer should also be disclosed in the Balance Sheet.

Prohibition to make further issue

On completion of buy back of shares or other specified securities, the
same kind of securities should not be again issued within a period of 6
months. However, this restriction is not applicable to bonus issue or
issues made in the discharge of subsisting obligations such as conversion
of warrants, stock option schemes, sweat equity or conversion of
preference shares or debentures into equity shares.