What is buy-back of shares?


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A Company possesses the right to purchase its own shares or other specific securities. The funds that can be utilized by the company for purchasing its own share should be out of:-

  1. Its free reserves
  2. The security premium account
  3. The proceeds of any shares or other specified securities.

According to section 77A(1), the buy-back of any kind of shares or other specified securities cannot be made out of the proceeds of an earlier issue of the similar kind of shares or other specified securities.

Employees’ stock option or other securities as may be noticed by the central government from time to time may be included in specified securities.


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