Step-wise procedure for Buy-Back of Shares under Companies Act, 2013

Srl No Date Event Comment

1. Day 0 Obtain a valuation certificate
from the Statutory
Auditor/Independent valuer.
2. Day 1 Notice issued to the Board of At the BOD Meeting adopt a
Directors of the Company (with resolution authorising the buy
consent of at-least 2/3rds of the back of 6,25,000 shares in
total number of directors) for accordance with the provisions
holding a BOD meeting at short of Section 68 of the Act,
notice. Companies (Share Capital &
Debenture Rules) 2014 read
with Art. 16A of the Articles of
Association of the Company
2. Day 2 File with the ROC
(i) Letter of Offer and Please see note appearing
(ii) a declaration of below on the Letter of Offer.
solvency signed by
the Managing Solvency Declaration should be
Director and one in Form SH 9
other director of the
Company
3. Day 2 Send the Letter of Offer to all the
shareholders of the Company
4. Day 18 Offer of buy back to close
5 Day 19 Company to open a separate This is not in the nature of an
bank account and deposit in such escrow account but it is a
account a sum equal to the entire separate designated account
sum that will be payable as
consideration for the shares
tendered in the buy-back
6 Before Day Company to complete The Rules stipulate that the
33 verification of shares received in verification should be
the buy back before this date. completed within 15 days of
closure. As such the Company
can compress the time frame
mentioned in this row. If it
completes the verification
earlier than 15 days.
7. Day 40 Within 7 days of completion of If the Company completes the
the verification the Company to: verification quickly then the
(i) make payment of time period mentioned in this
consideration for row can be further
shares that have compressed.
been bought back.
(ii) Extinguish and
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physically destroy
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 shares bought back
Company to
8 Day 40 File a return with ROC In Form SH 11 & Form SH15
accompanied by a certificate in respectively
the prescribed form signed by the
Managing Director and one other
director, certifying that the buy
back of securities has been made
in compliance with the provisions
of the Companies Act and Rules
made there under
9 At all times Company to maintain a register Form SH 10
post of shares bought back. Entries in
completion the register to be authenticated
of Buy Back by the Secretary/Authorised
persons

Note:

1. To ensure that post buy back Debt Equity Ratio of the Company is not be more than twice
the paid up capital and free reserves.
2. To ensure that all the shares proposed to be bought back by the Company are fully paid up.
3. On the question of valuation of the shares, Rule 19(1) of the Companies (Share Capital &
Debentures) Rules, 2014 stipulates that the Explanatory Statement to be annexed to the
notice to be issued to the shareholders shall contain the details as set out under (a) to (n) of
the said Rule. Sub-rule (n) specifies that the Explanatory Statement should contain a report
addressed to the BOD by the Company’s Auditors stating interalia that the audited accounts
on the basis of which the calculation with reference to buy-back is done is not more than 6
months from the date of the offer document. There is no such stipulation in the case of buy-
back pursuant to a Board Resolution. As such in our view the above stipulation does not apply
in the case of a buy back pursuant to a BOD resolution.
4. Rule 19(2) of the Companies (Share Capital & Debentures) Rules, 2014 stipulates that where
a buy-back of shares is pursuant to a special resolution then the Letter of Offer shall be in
Form SH. 8. It further stipulates that the Letter of Offer shall be filed with the ROC. The Rules
do not stipulate any prescribed Form of the Letter of Offer in case of a buy back pursuant to
a Board Resolution. The Rules also do not stipulate a requirement of filing the Letter of
Offer with the ROC and as such in our view the requirement of filing Form SH 8 does not
arise in the case of a buy-back pursuant to a Board Resolution. However in our view the
Letter of Offer to be issued to the Shareholders should contain the details as specified in Form
SH 8.
5. The Rules further expressly state that the Letter of Offer should contain:
a. true, factual and material information and must not contain any misleading
information.
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b. A statement that the directors of the Company accept responsibility for information
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contained in such document.

c. A confirmation that the Company is opening a separate bank account for the purposes
of the buy back.

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