Today’s Topic – Describe powers of the Company to Purchase its own Securities

[Revision Series for IPCC audit]

Dear IPCC Student,

 

Exams are approaching.

Time to revise is reducing.

Are you worrying about How to revise the whole syllabus in last 15 days?

 

We have a Solution-

You concentrate on the subjects which you consider vast to revise, & we’ll provide you the revision for Audit.

For these last 15 days, we’ll provide you one topic every day to revise & the manner in which you are required to write the answer.

If you want the discussion on any specific topic, you can mail us & we’ll provide you the tips for the same to revise & remember it fast.

 

For last hour revision of other topics & To revise the whole syllabus in just 5-6 hours, refer to the Book “Revision Series for IPCC - Audit, by CA Gunja Maheshwari”.

About the Book –

·        Covers all points mentioned in the Syllabus as prescribed by ICAI

·        Judicious use of Flowcharts for explaining the concept

·        Easy language to understand, revise & remember the topic fast.

·        Require only 5-6 hours to revise the whole Syllabus of Audit.

 

Today’s Topic –

 

Describe powers of the Company to Purchase its own Securities  (These are the exact extract from the Book ‘Revision Series for IPCC - Audit’)

(As now, you have got the idea of how to proceed to write the answer for different marks, we’ll now provide answers only for an 8 marks Q, which you can short out yourself if the same asked for less marks)

(Purchase of own securities refer to Buy Back of Securities under section 77A)

 

Buy Back refers to the repurchase of outstanding shares (repurchase) by a company in order to reduce the number of shares in the market.

Buy Back can be made out of :

i.                    Free Reserves

ii.                  Securities Premium A/c

iii.                Proceeds of any earlier Issue other than those made specifically for Buy Back.

Company cannot Buy Back its Shares unless :

·         It is authorised by its AoA

·         Special Resolutions is passed at GM to Authorise Buy Back :

o     Nothing contained in above two provisions shall apply in case where :

§  Buy Back is less than 10% of (total Paid Up Equity Capital + Free Reserves) &

§  Such Buy Back has been authorised by BoD by means of a resolution passed in a Meeting.

·         Buy Back should be less than 25% of (Paid up Capital + Free Reserves),

·         Debt Equity Ratio should not be more than 2:1 after Buy Back (Debt = Secured + Unsecured Debt),

·         All the Shares / Securities are fully paid up,

·         If the shares of the Company is listed on Stock Exchange then Buy Back should be made in accordance with SEBI Guidelines issued in this regards.

·         If the shares are not Listed then Buy Back should be in accordance with the prescribed guidelines.

·         Notice of meeting to pass Special Resolution should be accompanied with explanatory statement making full disclosure of Buy Back,

·         Buy Back should be completed within 12 months from date of passing Special Resolution,

·         Buy Back can be made from :-

o     Existing Security Holders on proportionate basis, or

o     Open market operations, or

o     Odd lots, or

o     By purchasing the securities issued to employees.

·         Company is required to file Solvency Certificate before Buy Back,

·         Company is required to physically destroy the securities within 7 days of last date of completion of Buy Back.

·         Company shall not issue same kind of Securities within 6 months except – by way of Bonus Share / Discharge of Subsisting Obligation / Conversion,

·         Company is required to maintain a Register for Securities Bought Back,

·         After completion of Buy Back within 30 days, Company should file a Return containing particulars of Buy Back with RoC & SEBI,

                  - No need to file return with SEBI if shares are not listed with Stock Exchange,

·         Verify whether proper entries are made in Books of Account for effecting Buy Back.

 

 

(If you remember the SA number or name than only mention, don’t mention the wrong number; in that case just mention the concept as according to the standards of auditing.

Firstly explain the meaning according the related SA, than explain the meaning in general and then give all the details regarding the topic.)

 

                                                                                                              

Best Wishes,

Revision Series for IPCC - Audit