Requirement to be complied after buy-back: section 77A and 77AA of the companies Act, 19565 deals with the requirement to be fulfilled after buy-back. They are as follows:
- According to section 77A(7) the securities which are bought back should be extinguished and physically destroyed within 7 days after the completion of buy-back.
- A company is not permitted to issue same kind of shares or securities which were brought back for a period o 24 months. However, the following are permitted:-
- Bonus shares
- Sweat equity
- Stock option to employees
- Issue of securities of a different class than is other than one which was earlier bought back
- Subsisting obligation such as conversion of warrants
- Conversion of preference or debentures into equity shares [section 77A(8)]
- A register must be maintained by the company showing securities bought back, consideration paid for the buy-back, date of cancellation of securities, date of extinguishment and physical destruction of securities and other prescribed particulars [section 77A(a)]
- After the buy-back is over, a return must be filed with the registrar of companies and SEBI, if the company is listed within 30 days giving details as prescribed [section 77A(10)]
- According to section 77AA if the buy-back is done from the free reserves than a sum equal to the face value of share purchased will be transferred to capital redemption reserve account. Details of such transaction must be disclosed in Balance Sheet of the company.
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