Correct option is C
The buyback of shares is a structured process governed under Section 68 of the Companies Act, 2013 and SEBI (Buyback of Securities) Regulations, 2018 (for listed companies). The sequence followed is strictly regulatory in nature. The correct sequence is:
- D. Convening Board Meeting: The first step is to convene a board meeting to consider the proposal of buyback. If the proposed buyback is beyond a certain threshold, the board recommends calling an EGM.
- C. Approval for Extra-ordinary General Meeting (EGM): Shareholders’ approval is sought through an EGM, especially when the buyback exceeds10% of total paid-up equity capital and free reserves(up to a limit of 25%).
- E. Declaration of Solvency: Before making a public announcement or issuing the letter of offer, the company must file a Declaration of Solvency in Form SH-9 with the Registrar of Companies, declaring it can meet liabilities.
- A. Letter of Offer to the Shareholders: A Letter of Offer is dispatched to eligible shareholders indicating the terms of the buyback, timelines, and procedures.
- B. Opening of Bank Account: A separate Escrow Account is opened to deposit the consideration payable to shareholders whose shares are accepted under the buyback.
Thus, the correct order is: D → C → E → A → B.
Information Booster:
Buyback allows a company to repurchase its own shares from the existing shareholders, thereby reducing the number of outstanding shares and increasing shareholder value.
Buybacks can be done via:
Tender offer (offering to buy shares at a fixed price)
Open market purchase
Odd-lot holders (small shareholders)
Companies often use buybacks to return surplus cash, improve EPS, or prevent hostile takeovers.
- A Declaration of Solvency ensures the company will not be rendered insolvent within a year of buyback.
- SEBI regulates the process for listed companies, including a cooling-off period and restrictions on further issues post-buyback.
English
10 Questions
20 Marks
12 Mins
