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

Sunrise Textiles Ltd, a listed company, wishes to buy back its own shares. Which of the following is a permitted way of carrying out the buy-back under the Companies Act, 2013?

A buy-back from the open market is a permitted mode. The Act allows buy-back from existing holders proportionately, from the open market, or from employee stock option or sweat equity securities, while purchases through subsidiaries or investment companies are prohibited.

  1. APurchasing shares through a subsidiary company of Sunrise Textiles Ltd
  2. BPurchasing shares from the open marketCorrect
  3. CPurchasing shares through an investment company
  4. DPurchasing shares only from the promoters, excluding other shareholders

Explanation

Section 68(5) allows buy-back from existing shareholders on a proportionate basis, from the open market, or by purchasing securities issued to employees under a stock option or sweat equity scheme. Section 70 bars buy-back through a subsidiary or an investment company. Buying only from promoters is not among the permitted modes.

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