; Resolution for Company to Buy Back Stock from a Person
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Resolution for Company to Buy Back Stock from a Person

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									Procedure for buy back of shares through Stock exchange from existing shareholders of the Company wi




1.               

                                                                     [Procedure for alteration
Check the Articles of Association of the Company, it must contain a provision authorising the company to
in the Articles of Association]




2.               




                                                                     [Section 286] to discuss besides o
Convene and hold a Board Meeting after giving notice to all the directors




·                                                                                    
(Section 77A)




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Procedure for buy back of shares through Stock exchange from existing shareholders of the Company wi




3.               

                                                                  [Clause 19 of the
Inform the Stock Exchange with which shares of the company are listed about the date of this meeting p
Standard Listing Agreement]




4.               




Inform the said Stock Exchange within 15 minutes of the board Meeting, of the outcome of the meeting b




5.               




File Board resolution along with the Calendar of event in            [E-form no 61] with the Registrar of




6.               




The resolution should be approved by ¾ majority i.e the votes cast in  favour is three times or more than




7.               




File a certified true copy of the                                    [special resolution] in
[E-form no 23]


8.               

                                                                    Card / by cash /
Make the payment of requisite fees, fees can be paid through Credit (Fee Calculator) by cheque in favou



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Procedure for buy back of shares through Stock exchange from existing shareholders of the Company wi




9.             




                                                                   [Clauses 31(c),
Forward to the Stock Exchange promptly three copies of the notice of postal ballot. (d) and 33
of the Standard Listing Agreement]




10.            




After it has been authorised to buy-back, make a Public announcement at least 7 days before the comm




11.            




                                                                    Schedule V
A copy of the Public announcement shall be filed with SEBI within 2 days of such announcement along w




12.            




A declaration of solvency in F                                      orm no 4A




13.            




Give information to the stock –exchanges on daily basis regarding the securities purchased for buy-back




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Procedure for buy back of shares through Stock exchange from existing shareholders of the Company wi




14.            




                                                                    
The company shall buy-back its securities only through the order matching mechanism, except ‘all or no




15.            




The securities purchased by the company may not be necessary to be purchased at a uniform price.




16.            




The company shall pay the consideration to the stock –brokers on every settlement date.




17.            




The verification should be completed with in 15 days from the date of closure.




18.            




Extinguish and destroy the security certificate so bought back in the presence of Registrar to the issue\ m




19.            



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Procedure for buy back of shares through Stock exchange from existing shareholders of the Company wi




Furnish a certificate to SEBI and the Stock Exchange(s) with in 7 days of extinguishments and destructio




20.             




Issue a Public advertisement in the National daily with in 2 days of completion of buy-back.




21.             




Prepare a Register of Securities Bought Back in Form no 4B.




22.             




File a return in Form no 4C with the concerned Registrar of Companies and SEBI within 30 days of comp




NOTE :




The term 'buyback' has two meanings: First, when a business or person sells something,
especially shares, and then buys them again according to a fixed agreement; the buying back
by a company of its shares from an investor, who put venture capital up for the formation of the
company. Secondly, the buying by a corporation of its own stock in the open market in order to
reduce the number of outstanding shares; the buying by a corporation of its own stock in the
open market in order to reduce the number of outstanding shares.




The phrase 'buyback of shares' means the buying back of its shares or other securities by a



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Procedure for buy back of shares through Stock exchange from existing shareholders of the Company wit




company from the holders thereof. It is also referred to as share/stock buyback. A company
limited by shares or company limited by guarantee and having a share capital buys or
purchases from its shareholders the shares issued by it, at a certain price and thereby returns
the share capital to those shareholders. The share capital bought back has the effect of
reduction of share capital to the extent of the face value of the shares bought back and there is
cash outflow from the company to the extent of the price of the shares paid to the shareholders.
A buyback of shares results into the shareholders, whose shares are bought, ceasing to be the
members of the company. Their names are omitted from the Register of Members. A buyback is
different from redemption of share capital, e.g., redemption of redeemable preference shares.




A buyback of equity shares may be driven by any one or more of the following factors:

 To
(1) increase the underlying value of the share;
 To
(2) enhance Earnings Per Share (EPS);
 To
(3) reduce the excess share capital;
 To
(4) rationalise the capital base by writing off the capital which is lost or unrepresented by the available a
 To
(5) pay off surplus cash not required in the business;
 To
(6) increase the shareholding of the promoters or those in the management control of the company;
 To
(7) support share price during period of temporary weakness;
 To
(8) prevent takeover bid;
 As
(9) part of total financial restructuring;
 As
(10)part of compromise or arrangement (including amalgamation).


A company may be benefited in any one or more of the following ways from a buyback:

 Flexibility to companies to reorganise their capital structure;
(1)
 Improving return on capital, net profitability and Earning Per Share (EPS);
(2)
 Rendering of better service to the remaining shareholders by way of sustained dividend and appreciatio
(3)
 Reducing the risk of possible raids owing to lesser volume of shares in circulation;
(4)
 Maintenance of the management control stable and continued business policies;
(5)
 A
(6) viable preposition to investors to sell back the shares to the company instead of going through the sec
 Attracting equity investments in small businesses. Small businesses, which are mainly family concerns,
(7)
 Facilitating family rearrangements, enabling disgruntled members to realise their investments without th
(8)
 Facilitating buying out discontented shareholders or employee share holdings when the employment ce
(9)
 Eliminating fractional share holdings and odd lots.
(10)


The following matters have a bearing on the decision to buyback securities:

 Non-transferability of shares during lock-in period under SEBI Guidelines.
(1)
 Non-transferability of shares due to the condition under an agreement with
(2)
  )a
(a financial or development institution or bank lending money or providing financial assistance to the co
  )a
(b venture capital company; or



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Procedure for buy back of shares through Stock exchange from existing shareholders of the Company wi




 (c)any other party which has lent money to the company.
  Non-transferability of shares due to the condition under a non-disposal undertaking given to a financial o
 (3)
  Non-transferability of shares due to the prohibition under a shareholders or joint venture agreement or a
 (4)
  Purchase of any shares by a company or sale of shares by a shareholder which
 (5)
 (a                e.g.          of any law, rules, regulations or conditions of approval given by any authorit
   )would be in contravention FIPB, RBI, DCA, etc);
 (b)would require any permission or approval of financial institution, bank or other authorities;
 (c)is prohibited by an order of any court.
  Probability of conditions under listing requirement or continued listing, such as minimum public shareho
 (6)             b           ) of the Securities Contracts (Regulation) Rules, 1956, minimum number of pu
 (7)             )            if as a result of buyback subsidiary company by the holding company in the s
  Probability of the buying company ceasing to be a of equity shares held (or 100% subsidiary
  If
 (8)as result of the buyback the free reserves will diminish, its effect on
 (a)the limit for acceptance of deposits under the Companies (Acceptance of Deposits) Rules under sectio
 (b)the limit under section 372A for inter-corporate investments, loans, guarantees and securities.
  Probability of violation due to crossing the limit on shareholding by a director under rule 86 or 105 of the
 (9)
  Effect
 (10) of buyback on
 (a)the market price of the company's share due to reduction of floating stock in the market;
 (b)the market capitalisation;
 (c)borrowing capacity of the company;
 (d)debt-equity ratio;
 (e)other financial ratios which would upset the financial parameters which are usually applied to measure
  Interest rate on borrowing from financial institutions or banks for working capital.
 (11)
 




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