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Unit 4: Buy Back of Securities by Private Limited and Unlisted Public Limited Companies

Securities not purchasable Notes
(a) partly-paid securities
(b) securities which are subject to lock-in period or otherwise non-transferable.
(c) Securities held by promoters or persons in control of the company, if the buy-back is
through stock exchange.
Procedural formalities
The process of Buy-back, inter-alia, includes the following steps to be taken up by the Company:

1. A Board resolution should be passed at a duly convened Board meeting authorising buy-
back and approving the draft notice for convening Extraordinary General Meeting to pass
the necessary resolution(s) and amending Articles of Association, if required.
2. Notice convening EGM should be sent to each and every shareholder entitled to receive
and attend the general meeting along with an explanatory statement containing prescribed
particulars.
3. Necessary resolution(s) should be passed at the Extraordinary General Meeting of the
members of the Company authorising the Company to buy-back its own shares/securities
and amending Articles of Association, if required.
4. As soon as the Company has passed the special resolution for buy-back and before making
the buy-back, the Company shall file with the Registrar of Companies the following
forms/documents:
(i) Form No. 23 pursuant to Section 192 of the Act.

(ii) Declaration of Solvency in Form No. 4A signed by two directors including the
Managing Director, if any of the Company and duly verified by way of an affidavit.
(iii) A draft letter of Offer containing prescribed particulars. On filing of the same the
offer becomes irrevocable on the part of the Company.
5. Letter of offer, shall be sent to the shareholders of the Company, within 21 days of filing
of draft letter of offer with the ROC.
6. The letter of offer should contain inter alia the following:
(i) true factual and material information;

(ii) no misleading information;
(iii) a statement that the directors of the company accept the responsibility for the
information contained in it.
7. No shares including bonus shares shall be issued till the date of the closure of the offer of
buy-back of shares.
8. Confirm in the letter of offer the opening of a separate bank account testifying the
availability of funds earmarked for it and also about payment of consideration only by
way of cash or Bank Draft/pay order.
9. Once the draft letter of offer has been filed with the Registrar of Companies, it shall not be
withdrawn.
10. Any money borrowed from Banks/Financial Institutions shall not be used for the purpose
of buying back the company’s shares.
11. The offer should remain open for a period not less than 15 days and not exceeding 30 days
from the date of despatch of letter of offer.

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