Section 68 of 2013

1. Section 68 of 2013 Buy Back of Shares or Other Specified Securities

2. Applicability • Private Companies • Unlisted Public Companies

3. Purchase own securities • out of— • Free reserves • Securities Premium Account or • Proceeds of issue of any shares • No buy-back - out of proceeds of an earlier issue of same kind of shares “Free Reserves” includes Securities Premium Account.

4. No Buy Back Unless- • Buy-back is authorized by its articles • Board Resolution – If 10% or less of total paid-up equity capital and free reserves • Special Resolution - More than 10% of total paid-up equity capital and free reserves **Paid-up equity capital of that FY in which buy back is made and not in totality

5. Buy back shares from • Existing shareholders/security holders on a proportionate basis; • Open market; • By purchasing securities issued to employees pursuant to scheme of stock option or sweat equity.

6. No Buy Back Unless……… • Maximum Buy-back - 25% or less of aggregate of paid-up capital and free reserves **If buy-back of equity shares - 25% of total paid-up equity capital

7. No Buy Back Unless……… • Ratio of secured and unsecureddebts after buy-back - not more than twice paid-up capital and its free reserves • All shares are fully paid-up Subsequent offer of buy back – after 1 year from date of closure of preceding offer of buy-back

8. Procedure • Hold BM and Pass resolution if less than 10% • Hold GM and Pass Special Resolution if more than 10% • File Form No. MGT – 14 • File with ROC a declaration of solvency with an affidavit – Form SH-9

9. Procedure • File letter of offer with ROC Form No. SH.8 • Dispatch Letter of offer to shareholders/security holders within 20 days from filing with ROC. • Offer remain open for 15 to 30 days from date of dispatch of letter of offer. • Immediately after closure of offer - open a separate bank account and deposit such sum, as would make up entire sum due and payable as consideration for shares tendered

10. Procedure……. • complete verifications of offers received within 15 days from date of closure of offer • shares lodged shall be deemed to be accepted unless a communication of rejection is made within 21 days from date of closure of offer. • within 7 days after end of 21 days - Make payment and Return share certificates

11. Procedure……. • Extinguish & physically destroy shares so bought back within 7 days • Make entries in Register of Buy Back - Form No. SH.10 • File return of buy-back within 30 days of completion - Form No. SH.11 along with a certificate in Form No. SH.15

12. Report from Auditor • After BM obtain Report addressed to BOD by company’s auditors – To be annexed with Notice stating that- • They have inquired into company’s state of affairs; • Amount of permissible capital payment for securities in question is in their view properly determined; • Audited accounts on the basis of which calculation with reference to buy back is done is not more than 6 months old from date of offer document; and • BOD have formed opinion as specified in clause 17(1)(m) of Rules and company shall not be rendered insolvent within a period of 1 year from that date

13. Capital Redemption Reserve Account (CRRA) • Transfer sum equal to nominal value of shares so purchased and details of such transfer disclose in Balance Sheet. • CRRA may applied, in paying up unissued shares to be issued as fully paid bonus shares. • Company shall not utilize any money borrowed from banks/FI for buying back its shares

14. Prohibition for buy-back • Through any subsidiary including its own subsidiary companies • Through any investment /group of investment companies or • if a default, is made in repayment of deposits accepted & interest payment thereon, redemption of debentures/preference shares/payment of dividend /repayment of any term loan/interest payable thereon to any FI or banking company • NA above – if default is remedied and 3 years has lapsed after such default ceased to subsist.

15. Prohibition for buy-back……. • No company shall, directly/indirectly, purchase its own shares if not complied with : • Section 92 - Annual Return • Section 23 - Declaration of dividend • Section 127 - Punishment for failure to distribute dividends and • Section 129 - Financial Statement

16. Further Issue / Allotment • No further issue of same kind of shares including allotment of new shares u/s 62(1) (a) - for 6 months of completion- - Except bonus issue/in discharge of subsisting obligations such as conversion • Not issue new shares/bonus shares from passing resolution till date of closure of offer- - Except those arising out of any outstanding convertible instruments;

17. Notice of GM • Accompanied by an explanatory statement u/s. 102 stating- • a full and complete disclosure of all material facts; • the necessity for the buy-back;

18. Notice of GM…… • the class of shares or securities intended to be purchased under the buy-back; • the amount to be invested under the buy-back; and • the time-limit for completion of buy-back.

19. Completion of Buy back • within a period of 1 year from date of passing of special resolution/passed by Board

20. Punishment • If a company makes default - punishable with fine Rs.1,00,000/- to Rs. 3,00,000/- • Every officer who is in default - punishable with imprisonment for term up to 3 years or fine Rs. 1,00,000/- to Rs. 3,00,000/- • or with both.

21. Forms & Formats • Form No. MGT – 14- Special Resolution • Form No. SH- 9- declaration of solvency • Form No. SH- 8- Letter of Offer • Form No. SH- 10 Format of Buy Back Register • Form No. SH- 11- Return of Buy Back