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CS Executive · Capital Market and Securities Laws · Buy-Back of Securities

After completing a buy-back of equity shares, Lakshya Engineering Ltd wants to make a fresh issue of equity shares. Under section 68, which issue is NOT barred within six months of completing the buy-back?

A bonus issue is not barred. After completing a buy-back, the company cannot make a further issue of the same kind of shares for six months, except by bonus issue or in discharge of subsisting obligations such as conversion of warrants or stock options.

  1. AA rights issue of equity shares to existing members
  2. BA preferential allotment of equity shares to a new investor
  3. CA bonus issue of equity sharesCorrect
  4. DA public issue of equity shares through a prospectus

Explanation

Section 68(8) bars a further issue of the same kind of shares within six months of completing a buy-back, except a bonus issue or discharge of subsisting obligations such as conversion of warrants, stock options, sweat equity or conversion of preference shares or debentures. Rights, preferential and public issues are therefore barred.

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