The Companies Act, 1956 was amended recently through the Companies (Amendment) Act, 1999. One of the amendments relate to introduction of a new Section viz. Sec.77 A into the Companies Act to facilitate companies to buy-back their own securities. The provisions of this Section empower SEBI to notify the procedure relating to buy-back of securities by listed compan ies. In so far as Private Ltd. Companies and Unlisted Public Limited Companies are concerned, the powers are vested with the Central Govt.

2. SEBI have already notified the Securities and Exchange Board of India (Buy-Back of Securities) Regulations, 1998 to govern the procedure relating to Listed Public Ltd. Companies. This was notified in the Gazette of India Extraordinary as Notification No.SO 975 (E) dated 14.11.1998.

    

3. The Central Govt. have now notified the Private Limited Company and Unlisted Public Limited Company (Buy-back of Securities) Rules, 1999 by Notification No.GSR 502 (E) in the Gazette of India Extraordinary dated 6.7.1999.

4. The Rules provide for buy-back of securities by companies either from the existing shareholders at a proportionate basis through private offers or by purchasing the securities issued to employees of the company pursuant to a Scheme of Stock Option or Sweat Equity. Before embarking on buy-back of securities, the company should obtain the approval of its members at the General Meeting by a special resolution. The Rules prescribe the format in which the requisite disclosures are to be made to the shareholders in the Explanatory Statement annexed to the notice for the General Meeting pursuant to Sec.173 of the Companies Act, 1956. After obtaining the approval of the shareholders, the company is required to file a draft letter of offer as prescribed in the Rules with the Registrar of Companies concerned. The company is also

required to file a Declaration of Solvency in the prescribed manner along with the letter of offer. Thereafter the Company can issue letters of offer. However, the time limits prescribed in the Rules have to be complied with. The company should also open a special bank account immediately after the date of closure of the offer. The company is duty bound to deposit into this account the entire sum due and payable as consideration for the buy-back. Thereafter, the company is required to make payments to the shareholders concerned within the prescribed time limit.

5. The Rules also prescribe the format of a Return to be filed by the company with the Registrar and also the format of the Register of Securities to be maintained with reference to buy-back of shares.

6. A copy of the Private Ltd. Company and Unlisted Public Ltd. Company (Buy-Back of Securities) Rules, 1999 is available at the Web Page of Department of Company Affairs of the NIC Website at the following address :