Chapter 12: Buy Back of Securities and Equity Shares with Differential Rights - Test 1: answer key

Question 1 · 2 marks · Chapter 12: Buy Back of Securities and Equity Shares with Differential Rights · hard

Scenario. Sterling Garments Ltd. is a listed non-Ind AS company preparing its accounts for the year ended 31 March 2026. Its balance sheet extract is: equity share capital ₹24,00,000 (2,40,000 equity shares of ₹10 each, fully paid); 8% preference share capital ₹16,00,000 (₹100 each, fully paid); general reserve ₹18,00,000; securities premium ₹6,00,000; profit and loss account credit balance ₹4,00,000; revaluation reserve ₹5,00,000; long-term borrowings ₹20,00,000; short-term borrowings ₹4,00,000; trade payables ₹3,00,000. The board proposes a buy-back of 48,000 equity shares at ₹40 per share. The buy-back is authorised by the articles and a special resolution is proposed. The company wants to know the maximum permissible buy-back under the Companies Act, 2013, the accounting treatment for premium and the amount to be transferred to Capital Redemption Reserve. The revaluation reserve arose from a recent revaluation of plant and is unrealised. The securities premium account is available for utilisation, subject to statutory limits. The company has no default in repayment of deposits, debentures, preference shares, dividend or term loans. Its shares are listed and SEBI regulations are applicable. The finance team is also examining whether the proposed buy-back could have been approved only by a board resolution. You are required to apply the three statutory numerical tests and the relevant proviso to Section 68(2).

What is the maximum number of equity shares that Sterling Garments Ltd. can buy back under the overall statutory limits, considering all three tests?

1. 42,500 equity shares (correct answer)
2. 60,000 equity shares
3. 48,000 equity shares
4. 1,12,000 equity shares

Answer: A — 42,500 equity shares

Explanation. Free reserves for Section 68 are general reserve ₹18 lakh + securities premium ₹6 lakh + P&L ₹4 lakh = ₹28 lakh; revaluation reserve is excluded. Paid-up capital is equity ₹24 lakh + preference ₹16 lakh = ₹40 lakh. Resource test limit is 25% of ₹68 lakh = ₹17 lakh; at ₹40 per share this gives 42,500 shares. Share outstanding test gives 25% of 2,40,000 = 60,000 shares. Debt-equity test does not reduce the limit below 42,500 shares. The least is 42,500 shares.

Where it goes wrong. Students often include revaluation reserve in free reserves or apply the 25% share outstanding test alone, ignoring the resource test.

Authority. Section 68(2)(c), 68(2)(d) and 68(2)(e) of Companies Act, 2013

Question 2 · 2 marks · Chapter 12: Buy Back of Securities and Equity Shares with Differential Rights · medium

If Sterling Garments Ltd. buys back 42,500 equity shares at ₹40 each out of free reserves and securities premium, what amount must be transferred to Capital Redemption Reserve?

1. ₹4,80,000
2. ₹4,25,000 (correct answer)
3. ₹12,75,000
4. ₹1,70,000

Answer: B — ₹4,25,000

Explanation. Under Section 69(1), where shares are bought back out of free reserves or securities premium, a sum equal to the nominal value of shares bought back is transferred to Capital Redemption Reserve. Nominal value = 42,500 shares × ₹10 = ₹4,25,000. The premium paid is separate and is adjusted against securities premium and/or free reserves.

Where it goes wrong. Students often transfer the total buy-back consideration ₹17,00,000 or the premium ₹12,75,000 to CRR instead of only the nominal value.

Authority. Section 69(1) of Companies Act, 2013

Question 3 · 2 marks · Chapter 12: Buy Back of Securities and Equity Shares with Differential Rights · medium

For the buy-back of 42,500 equity shares at ₹40 each, what amount of premium payable on buy-back must be charged to free reserves other than the securities premium account?

1. ₹12,75,000
2. ₹6,00,000
3. ₹6,75,000 (correct answer)
4. ₹4,25,000

Answer: C — ₹6,75,000

Explanation. Total premium = 42,500 × (₹40 − ₹10) = ₹12,75,000. Securities premium available is ₹6,00,000. The balance premium to be charged to other free reserves = ₹12,75,000 − ₹6,00,000 = ₹6,75,000. Revaluation reserve cannot be used because it represents unrealised gain.

Where it goes wrong. Students often adjust the entire premium against securities premium even when its balance is insufficient, or use revaluation reserve.

Authority. Section 68(1) and Section 69(1) of Companies Act, 2013

Question 4 · 2 marks · Chapter 12: Buy Back of Securities and Equity Shares with Differential Rights · medium

What is the maximum amount of buy-back that Sterling Garments Ltd. could have undertaken using only a board resolution, without a special resolution?

1. ₹6,80,000
2. ₹4,00,000
3. ₹10,00,000
4. ₹5,20,000 (correct answer)

Answer: D — ₹5,20,000

Explanation. The board-resolution route is available where the buy-back is 10% or less of paid-up equity capital plus free reserves. Here, paid-up equity capital is ₹24 lakh and free reserves are ₹28 lakh; total ₹52 lakh. Ten per cent = ₹5,20,000. Since the proposed buy-back is much larger, a special resolution is required.

Where it goes wrong. Students often include preference capital in the 10% board-resolution threshold, which is not permitted by the proviso.

Authority. Proviso to Section 68(2) of Companies Act, 2013

Question 5 · 2 marks · Chapter 12: Buy Back of Securities and Equity Shares with Differential Rights · hard

Scenario. Zenith Alloys Ltd. is an unlisted non-Ind AS company with equity share capital of ₹60,00,000 divided into 6,00,000 fully paid equity shares of ₹10 each. It also has 8% preference share capital of ₹20,00,000, general reserve ₹25,00,000, securities premium ₹10,00,000 and profit and loss account credit balance ₹5,00,000. There is no revaluation reserve. The company has long-term and short-term borrowings aggregating ₹1,80,00,000. It proposes to buy back 1,20,000 equity shares at ₹25 per share. The buy-back is authorised by its articles and a special resolution has been passed. The company has sufficient bank balance and no subsisting default. The management wants to determine the maximum number of shares that can be bought back under the debt-equity ratio test after applying the ICAI simultaneous-equation approach used for Section 68. It also wants to examine an alternative where it buys back only 80,000 equity shares at ₹25 per share and uses securities premium to the maximum extent for the premium payable on buy-back, with the balance premium and the statutory CRR transfer charged to general reserve. The company needs to know the closing general reserve, closing reserves and surplus, and the maximum bonus shares it can issue out of CRR. Assume all shares are fully paid and the buy-back is completed within the statutory time limit.

Using the ICAI simultaneous-equation approach for the debt-equity ratio test, what is the maximum number of equity shares Zenith Alloys Ltd. can buy back at ₹25 per share?

1. 1,20,000 equity shares
2. 1,50,000 equity shares
3. 85,714 equity shares (correct answer)
4. 1,00,000 equity shares

Answer: C — 85,714 equity shares

Explanation. Present equity = paid-up capital ₹80 lakh + free reserves ₹40 lakh = ₹120 lakh. Minimum equity after buy-back = debt ₹180 lakh ÷ 2 = ₹90 lakh. Let nominal CRR transfer be x and maximum buy-back amount be y; y/25 × 10 = x, so y = 2.5x. Also (120 − x) − 90 = y. Thus 30 − x = 2.5x, giving x = ₹8.5714 lakh and y = ₹21.4286 lakh. Maximum shares = ₹21.4286 lakh ÷ ₹25 = 85,714 shares.

Where it goes wrong. Students often simply compare existing debt with present equity and forget the post-buy-back minimum equity and CRR adjustment.

Authority. Section 68(2)(e) of Companies Act, 2013

Question 6 · 2 marks · Chapter 12: Buy Back of Securities and Equity Shares with Differential Rights · hard

If Zenith Alloys Ltd. buys back 80,000 equity shares at ₹25 each and charges balance premium and CRR transfer to general reserve, what is the closing balance of general reserve?

1. ₹17,00,000
2. ₹13,00,000
3. ₹23,00,000
4. ₹15,00,000 (correct answer)

Answer: D — ₹15,00,000

Explanation. Total buy-back = 80,000 × ₹25 = ₹20,00,000. Nominal value = ₹8,00,000; premium = ₹12,00,000. Securities premium absorbs ₹10,00,000, leaving ₹2,00,000 premium to general reserve. CRR transfer of ₹8,00,000 is also charged to general reserve. Closing general reserve = ₹25,00,000 − ₹2,00,000 − ₹8,00,000 = ₹15,00,000.

Where it goes wrong. Students often forget that the CRR transfer is also a charge to free reserves in addition to the unadjusted premium.

Authority. Section 69(1) of Companies Act, 2013

Question 7 · 2 marks · Chapter 12: Buy Back of Securities and Equity Shares with Differential Rights · hard

After the buy-back of 80,000 shares at ₹25 each, what is the closing total of Reserves and Surplus (including CRR)?

1. ₹28,00,000 (correct answer)
2. ₹32,00,000
3. ₹20,00,000
4. ₹40,00,000

Answer: A — ₹28,00,000

Explanation. Opening reserves and surplus = general ₹25 lakh + securities premium ₹10 lakh + P&L ₹5 lakh = ₹40 lakh. After buy-back: general reserve becomes ₹15 lakh; securities premium becomes nil; P&L remains ₹5 lakh; CRR is created at ₹8 lakh. Closing total = ₹15 + ₹0 + ₹5 + ₹8 = ₹28 lakh. The net decrease is ₹12 lakh, which is the premium paid, because nominal capital is reduced by ₹8 lakh and CRR is created by ₹8 lakh.

Where it goes wrong. Students often deduct the entire buy-back consideration from reserves, or omit CRR from the closing reserves and surplus.

Authority. Section 69(1) and Schedule III Division I of Companies Act, 2013

Question 8 · 2 marks · Chapter 12: Buy Back of Securities and Equity Shares with Differential Rights · medium

What is the maximum number of fully paid equity bonus shares of ₹10 each that Zenith Alloys Ltd. can issue out of the CRR created on the buy-back of 80,000 shares?

1. 1,00,000 equity shares
2. 60,000 equity shares
3. 80,000 equity shares (correct answer)
4. 1,20,000 equity shares

Answer: C — 80,000 equity shares

Explanation. CRR created is ₹8,00,000. Section 69(2) permits utilisation of CRR only for paying up unissued shares to be issued as fully paid bonus shares. Maximum ₹10 bonus shares = ₹8,00,000 ÷ ₹10 = 80,000 shares.

Where it goes wrong. Students often think CRR can be used for dividend or premium on buy-back, or they use the buy-back consideration instead of CRR.

Authority. Section 69(2) of Companies Act, 2013

Question 9 · 2 marks · Chapter 12: Buy Back of Securities and Equity Shares with Differential Rights · medium

Scenario. Kaveri Ltd. has paid-up equity capital of ₹80,00,000 and free reserves of ₹20,00,000. It proposes a buy-back amounting to ₹9,00,000, being 9% of paid-up equity capital plus free reserves. What minimum authorisation is required?

Kaveri Ltd. has paid-up equity capital of ₹80,00,000 and free reserves of ₹20,00,000. It proposes a buy-back amounting to ₹9,00,000, being 9% of paid-up equity capital plus free reserves. What minimum authorisation is required?

1. A special resolution passed at a general meeting
2. A board resolution passed at a duly convened board meeting (correct answer)
3. An ordinary resolution and prior SEBI approval
4. Only shareholders' approval by postal ballot

Answer: B — A board resolution passed at a duly convened board meeting

Explanation. Paid-up equity capital plus free reserves = ₹80 lakh + ₹20 lakh = ₹1 crore. Ten per cent = ₹10 lakh. Since the buy-back is ₹9 lakh, which is 10% or less, it can be authorised by a board resolution. The special resolution route is required only when the amount exceeds the 10% threshold.

Where it goes wrong. Students often compare the buy-back with paid-up capital alone or assume a special resolution is always compulsory.

Authority. Proviso to Section 68(2) of Companies Act, 2013

Question 10 · 2 marks · Chapter 12: Buy Back of Securities and Equity Shares with Differential Rights · hard

Scenario. Nalanda Ltd. has paid-up equity capital ₹50,00,000, preference capital ₹30,00,000 and free reserves ₹40,00,000. The free reserves include securities premium ₹10,00,000 and revaluation reserve ₹15,00,000. What is the maximum amount available for buy-back under the resource test?

Nalanda Ltd. has paid-up equity capital ₹50,00,000, preference capital ₹30,00,000 and free reserves ₹40,00,000. The free reserves include securities premium ₹10,00,000 and revaluation reserve ₹15,00,000. What is the maximum amount available for buy-back under the resource test?

1. ₹30,00,000
2. ₹26,25,000 (correct answer)
3. ₹33,75,000
4. ₹20,00,000

Answer: B — ₹26,25,000

Explanation. Free reserves for Section 68 exclude revaluation reserve. Thus free reserves = ₹40 lakh − ₹15 lakh = ₹25 lakh. Paid-up capital includes equity and preference = ₹80 lakh. Total paid-up capital plus free reserves = ₹105 lakh. Resource test limit = 25% of ₹105 lakh = ₹26,25,000.

Where it goes wrong. Students often include revaluation reserve in free reserves, giving ₹33.75 lakh, or include only equity capital.

Authority. Section 68(2)(c) and Explanation II to Section 68 of Companies Act, 2013

Question 11 · 2 marks · Chapter 12: Buy Back of Securities and Equity Shares with Differential Rights · hard

Scenario. A company had a subsisting default in repayment of term loan to a bank. The default was fully remedied and ceased on 1 July 2023. On which earliest date can the company undertake a buy-back under Section 70?

A company had a subsisting default in repayment of term loan to a bank. The default was fully remedied and ceased on 1 July 2023. On which earliest date can the company undertake a buy-back under Section 70?

1. 1 July 2026 (correct answer)
2. 1 July 2025
3. 1 April 2026
4. 31 March 2027

Answer: A — 1 July 2026

Explanation. Section 70(1)(c) prohibits buy-back while a default subsists. The proviso permits buy-back if the default is remedied and a period of three years has elapsed since the cessation of the default. Three years from 1 July 2023 ends on 1 July 2026; hence buy-back is permitted on or after that date.

Where it goes wrong. Students often apply a one-year gap or six-month restriction instead of the three-year post-default cooling period.

Authority. Proviso to Section 70(1)(c) of Companies Act, 2013

Question 12 · 2 marks · Chapter 12: Buy Back of Securities and Equity Shares with Differential Rights · medium

Scenario. After completion of buy-back, within how many days must the company extinguish and physically destroy the bought-back securities, and within how many days must it file the return with the Registrar?

After completion of buy-back, within how many days must the company extinguish and physically destroy the bought-back securities, and within how many days must it file the return with the Registrar?

1. 7 days and 30 days respectively (correct answer)
2. 30 days and 7 days respectively
3. 15 days and 30 days respectively
4. 7 days and 15 days respectively

Answer: A — 7 days and 30 days respectively

Explanation. Section 68(6) requires extinguishment and physical destruction within seven days of the last date of completion of buy-back. Section 68(9) requires filing of the return with the Registrar and SEBI within thirty days of completion. Both timelines are independent and must be complied with.

Where it goes wrong. Students often interchange the 7-day and 30-day timelines or apply the 15-day limit for return filing.

Authority. Section 68(6) and Section 68(9) of Companies Act, 2013

Question 13 · 2 marks · Chapter 12: Buy Back of Securities and Equity Shares with Differential Rights · hard

Scenario. Surya Ltd. buys back 2,00,000 equity shares of ₹10 each at ₹35 per share out of free reserves. What amount is transferred to CRR and what amount is charged to free reserves for premium?

Surya Ltd. buys back 2,00,000 equity shares of ₹10 each at ₹35 per share out of free reserves. What amount is transferred to CRR and what amount is charged to free reserves for premium?

1. CRR ₹70,00,000; premium ₹20,00,000
2. CRR ₹20,00,000; premium ₹30,00,000
3. CRR ₹20,00,000; premium ₹50,00,000 (correct answer)
4. CRR ₹50,00,000; premium ₹20,00,000

Answer: C — CRR ₹20,00,000; premium ₹50,00,000

Explanation. Total buy-back consideration = 2,00,000 × ₹35 = ₹70,00,000. Nominal value = 2,00,000 × ₹10 = ₹20,00,000, transferred to CRR. Premium = 2,00,000 × ₹25 = ₹50,00,000, adjusted against securities premium and/or free reserves. CRR is not the total consideration.

Where it goes wrong. Students often transfer total consideration to CRR and show only the balance as premium.

Authority. Section 69(1) of Companies Act, 2013

Question 14 · 2 marks · Chapter 12: Buy Back of Securities and Equity Shares with Differential Rights · medium

Scenario. Which of the following reserves cannot be used by a company for buy-back of its own shares or for adjustment of premium payable on buy-back?

Which of the following reserves cannot be used by a company for buy-back of its own shares or for adjustment of premium payable on buy-back?

1. General reserve
2. Securities premium account
3. Profit and loss account credit balance
4. Revaluation reserve (correct answer)

Answer: D — Revaluation reserve

Explanation. Revaluation reserve represents unrealised gain and is specifically excluded from free reserves. General reserve, securities premium and P&L credit balance are available, subject to statutory conditions. Therefore, revaluation reserve cannot be used for buy-back or for premium on buy-back.

Where it goes wrong. Students often treat all reserves appearing in the balance sheet as free reserves, including revaluation reserve.

Authority. Definition of free reserves under Section 68 and Section 69 of Companies Act, 2013

Question 15 · 2 marks · Chapter 12: Buy Back of Securities and Equity Shares with Differential Rights · hard

Scenario. A company has 8,00,000 fully paid equity shares of ₹10 each. During FY 2025-26 it has already bought back 1,20,000 equity shares. It now proposes a further buy-back of 90,000 equity shares in the same financial year. What is the position under the shares outstanding test?

A company has 8,00,000 fully paid equity shares of ₹10 each. During FY 2025-26 it has already bought back 1,20,000 equity shares. It now proposes a further buy-back of 90,000 equity shares in the same financial year. What is the position under the shares outstanding test?

1. Permitted, because the total buy-back is within 2,00,000 shares
2. Not permitted, because only 80,000 further shares can be bought back in that financial year (correct answer)
3. Permitted, because a further 1,00,000 shares can be bought back
4. Not permitted, because no second buy-back is allowed in the same financial year under all circumstances

Answer: B — Not permitted, because only 80,000 further shares can be bought back in that financial year

Explanation. The shares outstanding test limits buy-back of equity shares in a financial year to 25% of total paid-up equity capital. 25% of 8,00,000 = 2,00,000 shares. Already 1,20,000 shares were bought back, leaving a balance of 80,000 shares. The proposed 90,000 shares exceeds this limit. The one-year gap is a separate restriction, but the question asks specifically about the shares outstanding test.

Where it goes wrong. Students often compare the proposed 90,000 shares only with 25% of capital and ignore the shares already bought back during the year.

Authority. Section 68(2)(d) of Companies Act, 2013

Question 16 · 2 marks · Chapter 12: Buy Back of Securities and Equity Shares with Differential Rights · hard

Scenario. PQR Ltd. has paid-up equity capital ₹60,00,000, free reserves ₹30,00,000 and debt ₹1,00,00,000. It proposes a buy-back of ₹20,00,000, of which nominal value is ₹8,00,000. Using the ICAI approach of reducing present equity by nominal CRR transfer, what is the post-buy-back debt-equity ratio?

PQR Ltd. has paid-up equity capital ₹60,00,000, free reserves ₹30,00,000 and debt ₹1,00,00,000. It proposes a buy-back of ₹20,00,000, of which nominal value is ₹8,00,000. Using the ICAI approach of reducing present equity by nominal CRR transfer, what is the post-buy-back debt-equity ratio?

1. 1.11:1
2. 1.22:1 (correct answer)
3. 1.43:1
4. 1.67:1

Answer: B — 1.22:1

Explanation. Present equity = ₹60 lakh + ₹30 lakh = ₹90 lakh. Under the ICAI simultaneous-equation approach, equity for the debt-equity test is reduced by the nominal value transferred to CRR, i.e. ₹8 lakh. Post-buy-back equity = ₹82 lakh. Debt-equity ratio = ₹100 lakh ÷ ₹82 lakh = 1.22:1, which is within the maximum 2:1.

Where it goes wrong. Students often reduce equity by the entire buy-back consideration, giving 1.43:1, or ignore the CRR adjustment.

Authority. Section 68(2)(e) of Companies Act, 2013

Question 17 · 2 marks · Chapter 12: Buy Back of Securities and Equity Shares with Differential Rights · medium

Scenario. A company has paid-up equity capital of ₹90,00,000 and free reserves of ₹10,00,000. It proposes a buy-back of ₹11,00,000. Which authorisation is required?

A company has paid-up equity capital of ₹90,00,000 and free reserves of ₹10,00,000. It proposes a buy-back of ₹11,00,000. Which authorisation is required?

1. Board resolution is sufficient because the amount is within 25% of paid-up capital and free reserves
2. No resolution is required if the buy-back is out of securities premium
3. Only SEBI approval is required for a listed company
4. Special resolution is required because the amount exceeds 10% of paid-up equity capital plus free reserves (correct answer)

Answer: D — Special resolution is required because the amount exceeds 10% of paid-up equity capital plus free reserves

Explanation. The board-resolution threshold is 10% of paid-up equity capital plus free reserves = 10% of ₹1,00,00,000 = ₹10,00,000. The proposed buy-back is ₹11,00,000, which exceeds this threshold. Therefore, a special resolution is required, besides compliance with the articles and other conditions.

Where it goes wrong. Students often confuse the 25% overall limit with the 10% board-resolution threshold.

Authority. Proviso to Section 68(2) of Companies Act, 2013

Question 18 · 2 marks · Chapter 12: Buy Back of Securities and Equity Shares with Differential Rights · hard

Scenario. Which statement correctly reflects the SEBI Buy-back Regulations applicable to open market buy-back?

Which statement correctly reflects the SEBI Buy-back Regulations applicable to open market buy-back?

1. An open market offer for 15% or more is permitted if the company has free reserves; only 25% of the earmarked amount must be utilised
2. A company may make two open market offers within one year if each offer is below 10% of paid-up capital and free reserves
3. At least 25% of the amount earmarked must be utilised and a 15% open market offer is permitted with board approval
4. No open market offer for 15% or more of paid-up capital and free reserves shall be made, and at least 50% of the earmarked amount must be utilised (correct answer)

Answer: D — No open market offer for 15% or more of paid-up capital and free reserves shall be made, and at least 50% of the earmarked amount must be utilised

Explanation. The SEBI regulations provide that no offer of buy-back for fifteen per cent or more of the paid-up capital and free reserves shall be made from the open market. The company must also ensure that at least fifty per cent of the amount earmarked for buy-back is utilised for buying back shares or other specified securities.

Where it goes wrong. Students often remember the one-year gap but confuse the 15% open-market cap and the 50% utilisation requirement.

Authority. SEBI (Buy-back of Securities) Regulations as referred in Chapter 12

Question 19 · 2 marks · Chapter 12: Buy Back of Securities and Equity Shares with Differential Rights · hard

Scenario. A company wants to buy back its equity shares. Which of the following sources is permitted under Section 68(1)?

A company wants to buy back its equity shares. Which of the following sources is permitted under Section 68(1)?

1. Proceeds of an earlier issue of preference shares (correct answer)
2. Proceeds of an earlier issue of the same kind of equity shares
3. Revaluation reserve created on revaluation of plant
4. Unrealised fair value gain credited directly to equity

Answer: A — Proceeds of an earlier issue of preference shares

Explanation. Section 68(1) permits buy-back out of free reserves, securities premium account or proceeds of issue of any shares or other specified securities. However, no buy-back can be made out of proceeds of an earlier issue of the same kind of shares or same kind of securities. For equity buy-back, proceeds of preference shares are permitted. Revaluation reserve and unrealised gains are not free reserves.

Where it goes wrong. Students often miss the prohibition on using proceeds of the same kind of shares and may wrongly select equity proceeds or revaluation reserve.

Authority. Section 68(1) of Companies Act, 2013

Question 20 · 2 marks · Chapter 12: Buy Back of Securities and Equity Shares with Differential Rights · hard

Scenario. A company completed a buy-back of equity shares on 1 December 2025. It wants to make a further issue of equity shares on 1 April 2026. Which of the following is permitted during the six-month period following completion?

A company completed a buy-back of equity shares on 1 December 2025. It wants to make a further issue of equity shares on 1 April 2026. Which of the following is permitted during the six-month period following completion?

1. Fresh public issue of equity shares for cash
2. Rights issue of equity shares for cash
3. Bonus issue of equity shares (correct answer)
4. Preferential allotment of equity shares for cash

Answer: C — Bonus issue of equity shares

Explanation. Section 68(7) prohibits further issue of the same kind of shares or specified securities within six months of completion of buy-back, except by way of bonus issue or in discharge of subsisting obligations such as conversion of warrants, stock option schemes, sweat equity or conversion of preference shares/debentures into equity. A fresh, rights or preferential cash issue is not permitted during this period.

Where it goes wrong. Students often think any issue is allowed after buy-back or confuse the six-month restriction with the one-year gap between buy-backs.

Authority. Section 68(7) of Companies Act, 2013