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

Kaveri Textiles Ltd defaulted on repayment of a term loan instalment to a bank. The default was fully remedied on 1 April 2024 and the default ceased to subsist from that date. From which earliest date can the company make a buy-back, assuming all other conditions are met?

The company can buy back only after 1 April 2027. The Companies Act, 2013 permits a buy-back after a default, such as non-repayment of a bank term loan, only when the default is remedied and three years have lapsed after the default ceased to subsist.

  1. AImmediately after 1 April 2024, as the default is remedied
  2. BAfter 1 October 2024, six months from remedy
  3. CAfter 1 April 2025, one year from remedy
  4. DAfter 1 April 2027, three years from the date the default ceasedCorrect

Explanation

Under the proviso to section 70(1), a buy-back is not prohibited if the default is remedied and three years have lapsed after the default ceased to subsist. Three years from 1 April 2024 gives 1 April 2027. The six-month and one-year periods relate to other provisions, such as the restriction on fresh issue and the gap between offers.

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