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.
Letter of
Offer:
The letter of offer
shall be dispatched to the shareholders or security holders immediately after
filing the same with the Registrar of Companies but not later than
twenty days from its filing with the Registrar of
Companies.
Offer
period:
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.
Acceptance:
In case the number
of shares or other specified securities offered by the shareholders or security
holders is more than the total number of shares or securities to be bought back
by the company, the acceptance per shareholder shall be on proportionate
basis out of the total shares offered for being bought back.
Verification:
The company shall
complete the verifications of the offers received within fifteen
days from the date of closure of the offer and the shares or other
securities lodged shall be deemed to be accepted unless a communication of
rejection is made within twenty one days from the date of
closure of the offer.
Bank
Account:
The company shall
immediately after the date of closure of the offer, open a separate bank account
and deposit therein, such sum, as would make up the entire sum due and payable
as consideration for the shares tendered for buy-back in terms of these
rules.
Payment:
The company shall
within seven days of completion of verification:
(a) Make payment of consideration in cash to those
shareholders or security holders whose securities have been accepted;
or
(b) Return the share certificates to the shareholders or
security holders whose securities have not been accepted at all or the balance
of securities in case of part acceptance.
Conditions
for Letter of Offer:
The company shall
ensure that—
(a) 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) The company shall not issue any new shares including
by way of bonus shares from the date of passing of special resolution
authorizing the buy-back till the date of the closure of the offer under these
rules, except those arising out of any outstanding convertible
instruments;
(c) The company shall confirm in its offer the opening of
a separate bank account adequately funded for this purpose and to pay the
consideration only by way of cash;
(d) The company shall not withdraw the offer once it has
announced the offer to the shareholders;
(e) The company shall not utilize any money borrowed from
banks or financial institutions for the purpose of buying back its shares;
and
(f) The company shall not utilize the proceeds of an
earlier issue of the same kind of shares or same kind of other specified
securities for the buy-back.
Register of
Bought – back Securities:
The company shall
maintain a register of shares or other securities which have been bought-back in
Form SH – 10.
The register of
shares or securities bought-back shall be maintained at the registered office of
the company and shall be kept in the custody of the secretary of the company or
any other person authorized by the board in this behalf.
The entries in the
register shall be authenticated by the secretary of the company or by any other
person authorized by the Board for the purpose.
Return of
Buyback:
The company, after
the completion of the buy-back under these rules, shall file with the Registrar,
and in case of a listed company with the Registrar and the Securities and
Exchange Board of India, a return in the Form SH – 11 along
with the fee.
Certificate
of compliance in Buyback:
There shall be
annexed to the return filed with the Registrar in Form No. SH – 11, a
certificate in Form SH – 15 signed by two directors of the
company including the managing director, if any, certifying that the buy-back of
securities has been made in compliance with the provisions of the Act and the
rules made there under.06
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