Skip to content

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

Zenith Polymers Ltd, a listed company, wants to buy back its equity shares. Under the Companies Act, 2013, which of the following is one of the permitted ways in which a buy-back may be made?

A buy-back from the open market is a permitted mode under the Companies Act, 2013. The other permitted modes are a proportionate purchase from existing holders and purchase of employee stock option or sweat equity securities. Buying through subsidiaries or investment companies is prohibited.

  1. AFrom the open marketCorrect
  2. BOnly through a private negotiated purchase from the promoters
  3. CThrough its subsidiary company acting as a buyer on its behalf
  4. DThrough an investment company that holds its shares

Explanation

Section 68(5) allows buy-back from existing holders on a proportionate basis, from the open market, or by purchasing securities issued to employees under a stock option or sweat equity scheme. Buying through a subsidiary or an investment company is prohibited by section 70(1). A purely private purchase from promoters is not among the listed modes.

Did you get it right without looking?

One question tells you little. A timed set on Buy-Back of Securities shows your real accuracy, how long you take and where you lose marks.

Practise Buy-Back of SecuritiesFree diagnostic mock

More Buy-Back of Securities questions