What is buy-back of shares?
What is buy-back of shares?
Buy-back of shares means repurchasing of its own shares by a company from the market for reducing the number of shares in the open market. As per the Section 77A, 77AA and 77B of the Company Act of 1956, a company can Buy-back its own shares and debentures on the account of following reasons.
1. To improve EPS (Earnings Per Share)
2. To return surplus cash to the shareholders that is not required by the business
3. To support value of its shares
4. To facilitates capital restructuring of the company.
5. To prevent take-over bid.
Buy-back of shares may be done:
a) By purchasing shares from existing share holders on a proportionate basis, or
b) By purchasing shares from the open market, or
c) By purchasing shares from odd lots, viz. where the lot of securities listed in the recognised stock market is smaller than such marketable lot, or
d) By purchasing shares from the employees of the company
Sources for Buy-back of share:
1. Free Reserves,
2. Securities Premium Account,
3. Proceeds of any shares or other specified securities, provided that no Buy-back of any kind of shares or other specified securities shall be made out of the proceeds of the earlier issues of the similar kind of shares or similar kind of other specified securities.
Buy-back of shares means repurchasing of its own shares by a company from the market for reducing the number of shares in the open market. As per the Section 77A, 77AA and 77B of the Company Act of 1956, a company can Buy-back its own shares and debentures on the account of following reasons.
1. To improve EPS (Earnings Per Share)
2. To return surplus cash to the shareholders that is not required by the business
3. To support value of its shares
4. To facilitates capital restructuring of the company.
5. To prevent take-over bid.
Buy-back of shares may be done:
a) By purchasing shares from existing share holders on a proportionate basis, or
b) By purchasing shares from the open market, or
c) By purchasing shares from odd lots, viz. where the lot of securities listed in the recognised stock market is smaller than such marketable lot, or
d) By purchasing shares from the employees of the company
Sources for Buy-back of share:
1. Free Reserves,
2. Securities Premium Account,
3. Proceeds of any shares or other specified securities, provided that no Buy-back of any kind of shares or other specified securities shall be made out of the proceeds of the earlier issues of the similar kind of shares or similar kind of other specified securities.
