Buyback of Securities and Equity Shares with Differential Shares

About Equity Share!

Equity share

Owners of the company

With voting rights

With differential rights

Share

Equity Preference
Shares Shares

Differential Rights w.r.t:

a. Superior rate of
No differentiation
dividend
can be made
b. Superior/diluted
rate of voting
 BuyBack Means Purchase back

Companies Act and Rules, 2013

Section 68(1):

A company may purchase back:

▪ Its own shares or

▪ Other specified securities such as, employee stock option, out of:

[a] Capitalization of free

reserves (including

securities premium) Combination of

[a] & [b]

[b] Proceeds of fresh

issue

No such shares shall be bought back unless they are fully paid
Section 68(2) - Conditions for Buyback
Authorised by its : Articles of Association

Special resolution : at General Meeting

Maximum buyback with : - BOD < = 10%

- BOD and Members < = 25%

Reckoned on Paid up Capital and Free Reserves

Post buyback : Debt : Equity = 2:1

TIME between buybacks > 1YEAR

Multiple ways for Buyback of Shares

Section 68(5)

Proportionate purchase from

the existing shareholders

OR
May be
Open market
BuyBack through
OR
Purchase of Employee Stock
Option (ESOPs)
DOs & DON’Ts

To the outsider

i.e., fresh issue

Issue of same
class of shares
or specified
securities To the existing
shareholder

To the outsider

Issue of other i.e., fresh issue

class of shares
or specified
securities
To the existing
shareholder

Bonus issue

Conversion of warrants
Issue of same
class of shares
or specified
Stock option
securities
or

Conversion of preference shares

or debentures
Prohibitions

Purchase for investment through:

• any subsidiary or its subsidiary company

• or an investment company

• or group of investment companies

Purchase/buyback, if;

• Default subsists in either or all of the below:

• Repayment of deposits

• Redemption of debenture or preference shares

• Payment of interest or dividend within due dates

• Filing of annual returns

• Preparation of financials statement

SEBI Conditions

I] 15% of
Buyback offer [Paid-up
from the open Less than Capital
market +
Free Reserve]

II]
Buyback 1YEAR Buyback

III] Minimum 50% of Buyback

fund allocated Used for