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

Pragati Steels Ltd, a listed company, completed a buy-back of equity shares on 10 March. Later it plans to raise funds. Which issue of the same kind of shares is permitted within six months of completion of the buy-back under the Companies Act, 2013?

A bonus issue is permitted. After completing a buy-back, a company cannot make a further issue of the same kind of shares for six months, except by bonus issue or to discharge subsisting obligations like conversion of warrants, stock options, sweat equity, preference shares or debentures.

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

Explanation

Section 68(8) bars a further issue of the same kind of shares within six months except by way of 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 expressly covered by the bar through reference to section 62(1)(a). Public and preferential issues are also barred.

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