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

Keshav Foods Ltd, a listed company, has completed a buy-back of its equity shares. Within six months of completion, which of the following further issues of the same kind of shares would be allowed?

A bonus issue is allowed. After a buy-back, the company cannot issue the same kind of shares for six months, except by way of a bonus issue or to discharge subsisting obligations such as conversion of warrants or stock options.

  1. AA rights issue to existing shareholders
  2. BA bonus issue to existing shareholdersCorrect
  3. CA preferential allotment to a new investor
  4. DA fresh public issue of equity shares

Explanation

Under section 68(8), after completing a buy-back the company cannot make a further issue of the same kind of shares within six months, except by 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 is an issue under section 62(1)(a) and is barred.

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