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CMA Intermediate · Corporate Accounting and Auditing · Issue, Forfeiture, Rights, Bonus, Sweat Equity, ESOP and Buy-back of Shares

A company that has completed a buy-back of equity shares under the Companies Act, 2013 wishes to make a fresh issue. Which of the following issues is permitted within six months of completing the buy-back?

A bonus issue is permitted. After completing a buy-back, a company cannot make a further issue of the same kind of shares within six months, including a rights allotment, except by bonus issue or in discharge of subsisting obligations like conversion of warrants or options.

  1. AA bonus issue of the same kind of sharesCorrect
  2. BA rights issue of the same kind of shares
  3. CA public issue of the same kind of shares
  4. DA preferential allotment of the same kind of shares

Explanation

Section 68(8) bars a further issue of the same kind of shares within six months of completing a buy-back, except by way of a bonus issue or in discharge of subsisting obligations such as conversion of warrants, stock options, sweat equity or conversion of preference shares or debentures. A rights issue under section 62(1)(a) is specifically covered by the bar.

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