Page 280 - DMGT407Corporate and Business Laws

Unit 11: Prospectus, Shares and Share Capital

(a) through any subsidiary company including its own subsidiary companies, or (b) through Notes
any investment company or group of investment companies; or (c) if a default, by the
company, in repayment of deposit or interest payable thereon, redemption of debentures,
or preference shares or payment of dividend to any shareholder or repayment of any term
loan or interest payable thereon to any financial institution or bank, is subsisting.
13. Further no company shall directly or indirectly purchase its own shares or other specified
securities in case it has not complied with provisions of Ss. 159, 207 and 211.

Self Assessment

Fill in the blanks:
10. A public company and its subsidiary can issue only two kinds of shares which are
……………and……………

11. Sections 100-105 provide for the ………………..of share capital.
12. Section 94 provides that, if the …………….authorise, a company limited by share capital
may, by an ordinary resolution passed in general meeting, alter the conditions of its
memorandum in regard to capita.

Caselet ‘Buy Back’ Back in Action

—by Rajesh Abraham
uyback of shares are back in action on the bourses with several mid and small-cap
companies including SRF Ltd., Revathy Equipment, Caro Info Services, Indiabulls
Band Essel Propack coming out with buyback offers in recent times.
Analysts said the trend showed the confidence by the managements of companies that
stocks deserved better valuation on the bourses.
“Many mid and small stock prices have come down by more than 50 per cent in the recent
crash. If you look at the earnings growth of these companies, clearly, these stocks deserved
better valuation. Managements of companies are using buybacks to send a message that
the current prices do not justify the earnings potential,” said Mr Janish Shah, Head (Equity
Research), Networth Stock Broking Ltd.
If stock prices remain subdued for a prolonged period of time, the market is likely to
witness further offers for buybacks, he said. “I expect more companies to announce buybacks
in near term,” Mr Shah said.

However, there are fears that promoters may use the buyback route to increase their stake
in companies. This does not augur well for investors, according to Mr Kunj Bansal, Chief
Investment Officer, Religare Securities.
Companies use their cash surplus in a buyback offer and reduce equity share capital,
which indirectly increases the stakes of promoters. “Promoters tend to use the buyback
route to hike their holdings using the companies cash reserve instead of using funds in
their personal capacity to buy shares from the market through the creeping acquisition
route,” Mr Bansal said.
Contd...

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