Practicing Success
A company can buy its own shares when- |
The debt - Equity ratio is not more than 1:1 after the buy back. The amount of buy back shares in any financial year not exceeding 20% of the paid-up capital and free reserves. Partly paid up shares are considered buy back. Article of Association must authorise and special resolution has been passed for the buy back of shares. |
Article of Association must authorise and special resolution has been passed for the buy back of shares. |
When a company acquires its own shares, it is referred to as a 'share repurchase.' Section 68 of The Companies Act, 2013 outlines that a company can repurchase its own shares from the following sources: The company can finance the repurchase of its shares using free reserves, securities premium, or the proceeds from the sale of any shares or specified securities. If shares are repurchased using free reserves, the company must transfer an amount equal to the nominal value of the repurchased shares to the 'Capital Redemption Reserve Account.' The following procedures are required for a share repurchase: |