Buyback is an
important provision related to Share Capital of a company. 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.
Explanatory
Statement:
The explanatory
statement to be annexed to the notice of the general meeting pursuant to section
102 shall contain the following disclosures, namely:-
(b) The objective of the buy-back;
(c) The class of shares or other securities intended to
be purchased under the buy-back;
(d) The number of securities that the company proposes to
buy-back;
(e) The method to be adopted for the buy-back;
(f) The price at which the buy-back of shares or other
securities shall be made;
(g) The basis of arriving at the buy-back
price;
(h) The maximum amount to be paid for the buy-back and
the sources of funds from which the buy-back would be financed;
(i) The time-limit for the completion of
buy-back;
(j) Shareholding details:
(i) The aggregate shareholding of the promoters and of
the directors of the promoter, where the promoter is a company and of the
directors and key managerial personnel as on the date of the notice convening
the general meeting;
(ii) The aggregate number of equity shares purchased or
sold by persons mentioned in sub-clause (i) during a period of twelve months
preceding the date of the board meeting at which the buy-back was approved and
from that date till the date of notice convening the general meeting;
(iii) The maximum and minimum price at which purchases
and sales referred to in sub-clause (ii) were made along with the relevant
date;
(k) If the persons mentioned in sub-clause (i) of clause
(j) intend to tender their shares for buy-back –
(i) The quantum of shares proposed to be
tendered;
(iii) the details of their transactions and their
holdings for the last twelve months prior to the date of the board meeting at
which the buy-back was approved including information of number of shares
acquired, the price and the date of acquisition;
(l) A confirmation that there are no defaults subsisting
in repayment of deposits, interest payment thereon, redemption of debentures or
payment of interest thereon or redemption of preference shares or payment of
dividend due to any shareholder, or repayment of any term loans or interest
payable thereon to any financial institution or banking company;
(m) A confirmation that the Board of directors have made
a full enquiry into the affairs and prospects of the company and that they have
formed the opinion-
(i) That immediately following the date on which the
general meeting is convened there shall be no grounds on which the company could
be found unable to pay its debts;
(ii) As regards its prospects for the year immediately
following that date, that, having regard to their intentions with respect to the
management of the company’s business during that year and to the amount and
character of the financial resources which will in their view be available to
the company during that year, the company shall be able to meet its liabilities
as and when they fall due and shall not be rendered insolvent within a period of
one year from that date; and
(iii) The directors have taken into account the
liabilities (including prospective and contingent liabilities), as if the
company were being wound up under the provisions of the Companies Act,
2013
(n) A report addressed to the Board of directors by the
company’s auditors stating that-
(i) They have inquired into the company’s state of
affairs;
(ii) The amount of the permissible capital payment for
the securities in question is in their view properly determined;
(iii) 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; and
(iv) The Board of directors have formed the opinion as
specified in clause (m) on reasonable grounds and that the company, having
regard to its state of affairs, shall not be rendered insolvent within a period
of one year from that date.
Form for
buyback:
The company which
has been authorized by a special resolution shall, before the buy-back of
shares, file with the Registrar of Companies a letter of offer in Form
SH – 8, along with the fee.
The letter of offer
shall be dated and signed on behalf of the Board of directors of the company by
not less than two directors of the company, one of whom shall be the managing
director, where there is one.
Letter of
Offer:
The company shall
file with the Registrar, along with the letter of offer, and in case of a listed
company with the Registrar and the Securities and Exchange Board, a declaration
of solvency in Form SH – 9 along with the fee and signed by at
least two directors of the company, one of whom shall be the managing director,
if any, and verified by an affidavit as specified in the said Form.
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