Capital Market and Securities Laws · Buy-Back of Securities

Procedure for Buy-Back and Filing Requirements under Section 68

Updated 11 October 2026 · Fact-checked

Buy-back procedure under Section 68 runs in order: check authority in the articles, pass a Board or special resolution with an explanatory statement, file the declaration of solvency (Form SH-9), send the letter of offer, complete the buy-back within one year, pay, extinguish the securities within seven days, then maintain the register and file the return within thirty days.

Understand Procedure for Buy-Back and Filing Requirements

A buy-back is a company purchasing its own shares or other specified securities. Section 68 lets it do so only if it follows a fixed procedure. Think of the procedure as three phases: approval before the offer, the offer itself, and compliance after completion.

In the approval phase, the articles must authorise buy-back. Then you need either a special resolution at a general meeting, or a Board resolution passed at a meeting if the buy-back is ten per cent or less of the total paid-up equity capital and free reserves. The notice of the general meeting must carry an explanatory statement with full disclosure of material facts, the necessity for the buy-back, the class of securities, the amount to be invested and the time-limit for completion.

Before making the buy-back, the company files a declaration of solvency with the Registrar, and with SEBI if it is listed. It must be signed by at least two directors, one of whom is the managing director, if any. It is verified by an affidavit that the Board has made a full inquiry and believes the company can meet its liabilities and will not become insolvent within one year. Under the Rules this is in Form SH-9. An unlisted company does not file it with SEBI.

In the offer phase, the company sends a letter of offer to shareholders (Form SH-8 under the Rules) for an unlisted company. Buy-back may be from existing holders on a proportionate basis, from the open market, or by purchasing securities issued to employees under a stock option or sweat equity scheme. Listed securities follow SEBI regulations. Other securities follow the Rules. The whole buy-back must be completed within one year of the special resolution or Board resolution.

After completion, the company must extinguish and physically destroy the securities within seven days of the last date of completion. It keeps a register of buy-backs and files a return with the Registrar (and SEBI, if listed) within thirty days. For six months it cannot make a further issue of the same kind of securities, with limited exceptions.

Key rules to remember

Board-resolution route: Buy-back ≤ 10% of total paid-up equity capital and free reserves, plus Board resolution passed at a meeting; If this limit is crossed, a special resolution at a general meeting is needed.
Explanatory statement contents: Material facts + necessity + class of securities + amount to be invested + time-limit; It must accompany the notice of the general meeting called for the special resolution.
Declaration of solvency: Signed by at least 2 directors (one the MD, if any); filed with Registrar before buy-back; verified by affidavit; Filed with SEBI only if the company is listed. Form SH-9 under the Rules.
Completion period: Within 1 year from the date of the special resolution or Board resolution; Time runs from the resolution, not from the offer date.
Extinguishment: Extinguish and physically destroy within 7 days of the last date of completion; Counted from the last date of completion of the buy-back.
Return of buy-back: File with Registrar (and SEBI if listed) within 30 days of completion; Particulars are as prescribed; the Rules provide Form SH-11.
Gap between offers: No new offer within 1 year from the closure of the preceding offer; Applies under the proviso to Section 68(2).
Bar on fresh issue: No further issue of the same kind of securities for 6 months after completion; Exceptions: bonus issue and discharge of subsisting obligations such as conversion of warrants, ESOPs, sweat equity, or conversion of preference shares or debentures.
Register: Securities bought, consideration paid, date of cancellation, date of destruction, other prescribed particulars; Section 68(9). Form SH-10 under the Rules.

How to solve Procedure for Buy-Back and Filing Requirements questions

For any procedure question, walk the timeline in order and test each condition. Then give the conclusion with the section.

1Identify the company type (listed or unlisted) and the buy-back size against paid-up equity capital and free reserves.
2Check authority: articles authorise it, and decide the route: Board resolution (10% or less) or special resolution.
3If a special resolution is needed, list the explanatory statement items required with the notice.
4State the declaration of solvency: who signs, what the affidavit says, who it is filed with, and that it is filed before the buy-back.
5Describe the offer: mode (proportionate, open market, employee securities), the letter of offer, and the one-year completion limit.
6State the post-buy-back duties in order: extinguish within 7 days, update the register, file the return within 30 days.
7Add the consequences: six-month bar on fresh issue and the fine for default under Section 68(11).
8Conclude clearly: whether the company has complied, or which step is missing.

Quickest way: Timeline memory chain: Authority, Approval, Solvency, Offer, Completion, Destroy, Return

When to use it: Use it when the question asks you to list the procedure, or to find which step a company missed.

Write the chain A-A-S-O-C-D-R in the margin.
Tag each letter with its number: Approval 10% or special; Offer completed in 1 year; Destroy in 7 days; Return in 30 days.
Tick each step against the facts given and circle the missing or late one.
Write the conclusion with Section 68 and the sub-section for each point.

Common mistakes in Procedure for Buy-Back and Filing Requirements

Saying a special resolution is always needed.
Students remember clause (b) and forget its proviso.
Fix: A Board resolution passed at a meeting is enough if the buy-back is 10% or less of total paid-up equity capital and free reserves.
Saying the declaration of solvency is filed after the buy-back, or always with SEBI.
Students mix it up with the return of buy-back.
Fix: File it before the buy-back with the Registrar. File with SEBI only if the company is listed. It needs at least two directors, one being the MD if any.
Counting the one-year completion period from the offer opening date.
The offer feels like the starting point.
Fix: Count from the date of the special resolution or Board resolution under Section 68(4).
Mixing up the seven-day and thirty-day deadlines.
Both are post-completion duties.
Fix: Seven days to extinguish and destroy; thirty days to file the return.
Forgetting the explanatory statement or listing its contents incompletely.
Students treat it as a mere formality.
Fix: Memorise five heads: material facts, necessity, class of securities, amount, time-limit.
Confusing the one-year gap between buy-back offers with the six-month bar on fresh issue.
Both are timing restrictions after a buy-back.
Fix: One year is between offers of buy-back, from the closure of the preceding offer. Six months restricts fresh issue of the same kind of securities after completion.

Worked examples

Example 1

Rohan Textiles Ltd, an unlisted public company, has paid-up equity capital of ₹20 crore and free reserves of ₹30 crore. Its articles authorise buy-back. It plans a buy-back of ₹4 crore. Can the Board approve it alone?

Show the solution

Total paid-up equity capital and free reserves = ₹20 crore + ₹30 crore = ₹50 crore.
10% of ₹50 crore = ₹5 crore.
The buy-back of ₹4 crore is below ₹5 crore, so it is within the 10% limit.
The articles authorise buy-back, so the condition in Section 68(2)(a) is met.
A Board resolution passed at a meeting is therefore enough under the proviso to Section 68(2)(b). A special resolution is not needed.
The Board must still file the declaration of solvency with the Registrar before the buy-back. It need not be filed with SEBI as the company is unlisted.

Answer: Yes. The Board can approve it by a resolution passed at a meeting, as ₹4 crore is within the 10% limit of ₹5 crore, provided the articles authorise buy-back and the other conditions of Section 68(2) are met.

Example 2

Mehta Foods Pvt Ltd completes a buy-back on 20 March 2028. State the latest dates by which it must extinguish the securities and file the return, and the earliest date it may make a fresh issue of the same kind of shares (other than bonus or discharge of subsisting obligations).

Show the solution

Extinguishment: within seven days of the last date of completion. 20 March + 7 days = 27 March 2028 (Section 68(7)).
Return: within thirty days of completion. 20 March + 30 days = 19 April 2028 (Section 68(10)). The return goes to the Registrar only, as the company is unlisted.
Bar on fresh issue: six months from completion, so no fresh issue of the same kind of shares until 20 September 2028 (Section 68(8)).
The register under Section 68(9) must record the consideration paid and the dates of cancellation and destruction.

Answer: Extinguish and destroy by 27 March 2028; file the return with the Registrar by 19 April 2028; no fresh issue of the same kind of shares for six months, that is until 20 September 2028, except by bonus issue or in discharge of subsisting obligations.

Exam tips

For a 'discuss the procedure' question, answer in the order of the timeline and cite Section 68 sub-sections as you go.
Always state the conditions of the Board-resolution route: a 10% or less limit and a resolution passed at a Board meeting.
Quote the declaration of solvency precisely: two directors, one the MD if any, affidavit, one-year solvency opinion, and no SEBI filing for unlisted companies.
In case-study questions, compute the dates (one year, seven days, thirty days) and show the arithmetic.
Close with the penalty: default attracts a fine of ₹1 lakh to ₹3 lakh on the company and on each officer in default under Section 68(11).

Practice questions from Buy-Back of Securities

Procedure for Buy-Back and Filing Requirements in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Procedure for Buy-Back and Filing Requirements: frequently asked questions

What is Form SH-9 in a buy-back?

It is the form prescribed under the Rules for the declaration of solvency under Section 68(6). It is signed by at least two directors and verified by an affidavit. It is filed with the Registrar before the buy-back begins.

Does a private company file the declaration of solvency with SEBI?

No. The proviso to Section 68(6) says no declaration is filed with SEBI by a company whose shares are not listed on a recognised stock exchange. It is still filed with the Registrar.

Within how many days must bought-back shares be destroyed?

The company must extinguish and physically destroy them within seven days of the last date of completion of the buy-back. This is under Section 68(7).

How long does a company have to complete a buy-back?

Every buy-back must be completed within one year from the date of the special resolution or the Board resolution. Section 68(4) fixes this period.

What is the time limit for filing the return of buy-back?

The return must be filed with the Registrar, and with SEBI if the company is listed, within thirty days of completion. The particulars are as prescribed.