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

Arohan Textiles Ltd defaulted in paying dividend to a shareholder, and the default was remedied on 1 April 2024. Considering section 70, from when can the company validly buy back its shares, other conditions being met?

The company can buy back only after three years have lapsed from the date the default ceased to subsist. Section 70 bars buy-back during a default in dividend, deposits, debentures or term loans, and the bar continues until the default is remedied and three years pass.

  1. AImmediately after the default was remedied
  2. BAfter six months from remedying the default
  3. CAfter three years have lapsed from the date the default ceased to subsistCorrect
  4. DAfter one year from remedying the default

Explanation

Section 70(1)(c) prohibits buy-back if the company has defaulted in matters such as dividend payment. The proviso lifts the bar only when the default is remedied and three years have lapsed after it ceased to subsist. So the earliest date is 1 April 2027; shorter periods are wrong.

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