Companies Act Section 70 — Prohibition for buy-back in certain circumstances
CHAPTER IV SHARE CAPITAL AND DEBENTURES
Commercial / Corporate
Summary
Sub-section (1) states that a company cannot buy back its own shares or other specified securities, whether directly or indirectly, in three situations. First, it cannot do so through any subsidiary company, including its own subsidiary companies. Second, it cannot do so through any investment company or group of investment companies. Third, it cannot do so if the company has defaulted on repaying deposits accepted before or after this Act came into force, on paying interest on those deposits, on redeeming debentures or preference shares, on paying dividends to any shareholder, or on repaying any term loan or interest to a financial institution or banking company.
The proviso to sub-section (1) adds an exception: the buy-back is not prohibited if the default has been remedied and three years have passed after the default stopped existing.
Sub-section (2) states that a company cannot buy back its own shares or other specified securities, directly or indirectly, if it has not complied with the provisions of sections 92, 123, 127, and 129 of the Act.
Official Text
(1) No company shall directly or indirectly purchase its own shares or other specified securities—
(a) through any subsidiary company including its own subsidiary companies;
(b) through any investment company or group of investment companies; or
(c) if a default, is made by the company, in the repayment of deposits accepted either before or after the commencement of this Act, interest payment thereon, redemption of debentures or preference shares or payment of dividend to any shareholder, or re payment of any term loan or interest payable thereon to any financial institution or banking company:
Provided that the buy-back is not prohibited, if the default is remedied and a period of three years has lapsed after such default ceased to subsist.
(2) No company shall, directly or indirectly, purchase its own shares or other specified securities in case such company has not complied with the provisions of sections 92, 123,127 and section 129.