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

Rohan Steels Ltd completed a buy-back of equity shares on 1 March. It now wants to make a fresh rights issue of equity shares in the same year. Which statement is correct under the Companies Act, 2013?

The company cannot make a further issue of the same kind of shares for six months after completing the buy-back, except by a bonus issue or in discharge of subsisting obligations such as conversion of warrants, stock options, sweat equity, or conversion of preference shares or debentures.

  1. AIt may issue any shares immediately as buy-back has been completed
  2. BIt cannot make a further issue of the same kind of shares for six months, except by bonus issue or discharge of subsisting obligations such as conversion of warrants or stock optionsCorrect
  3. CIt cannot make any issue for one year, including bonus shares
  4. DIt cannot make a further issue for three years, but may issue bonus shares

Explanation

After completing a buy-back, the company shall not make a further issue of the same kind of shares or securities, including allotment under the rights provision, for six months. Exceptions are bonus issue and discharge of subsisting obligations such as conversion of warrants, stock option schemes, sweat equity, or conversion of preference shares or debentures. One year applies to the gap between buy-back offers.

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