Can a Private Limited Company do a TreasuryBuy Back of Shares? - MMJC

Treasury buy back is a kind of buy back in which the shares although purchased (bought back) by the issuing company, are not extinguished and are retained with an idea to sell it at an opportune time. Section 67 of Companies Act, 2013 (“the Act”) puts a prohibition on company to purchase its own shares. Section 68 of the Act specifically allows companies, both and private and public, to purchase their own shares subject to certain conditions, one of which is mandatory extinguishment of bought back shares. On 5 June 2015, Ministry of Corporate Affairs (MCA) granted certain exemptions to private limited companies, and one of those exemptions granted for private companies is exemption from compliance of section 67. Therefore, in case of private companies, there can be a possibility that it may do a treasury buy back, as there is no longer restriction on private companies under section 67 from purchasing its own shares. In this background, what can be the interplay between section 66, 67, 68 and MCA exemption notification dated 5 June 2015 and how one can interpret these provisions in the light of earlier Working Group Reports / Expert Committee Reports of Department of Company Affairs (DCA) are some questions deliberated in this article. 

The article written by Mr. Makarand Joshi and Ms. Deepti Yavagal Kulkarni – Partners of MMJC and published in the Chartered Secretary Journal of ICSI in the March Edition!

For the detailed article – click here