Company Law
National Law Institute University,
Bhopal
A Project Of Law of Business Association-II On
Buy Back of Shares
Submitted to:- Submitted by:-
Asso. Prof. (Dr.) Kondaiah J. Roll No. - 2009 B.A. LL.B. Enrollment No. A-0 VIII Trimester III Year
TABLE OF CONTENTS
1 Introduction 3
2 Understanding the Concept 3 2.1 Conceptual Conundrum 3 2.2 Methods of ‘buy-back’ 3
3 Law Governing Repurchase Of Shares In India 4 3.1 Introduction 4 3.2 Rationale behind Section 77 4 3.3 Objectives Of A Buy-back 5 3.4 Resources of Buy-back 5 3.5 Conditions of Buy-back 6 3.6 Sources from where the Shares can be purchased 6 3.7 Procedure 7
4 Law Governing Repurchase Under English Law 8
5 Law governing Repurchase under U.S. Law 8
6 The Debate: Pros and Cons 9
7 Conclusion 11
8 Bibliography 13 *
Introduction
The issue of a company buying back its shares has moved beyond the realm of abstract discussion among academicians and into the real world of corporate controversies. The endeavour should be to provide one with an overview of the concept of ‘buy-back’ of shares, the ensuing debate and some recommendations.
Understanding the Concept
In law, a company being a separate legal personality is capable of buying and holding property in its own name. a corollary to this privilege would be that a company could buy its own shares, shares being considered in all legal regimes as property.
Conceptual Conundrum
It is clear that conceptually, repurchase of shares runs counter to the age-old concept of separate legal personality. A company’s incorporating gives it a legal personality distinct from its shareholders. So, traditionally it was thought that repurchase of its own shares would negate that very distinction since a company would then become its own shareholder. But, modern times have witnessed a structural change in the theme and philosophy of Company Law
Bhopal
A Project Of Law of Business Association-II On
Buy Back of Shares
Submitted to:- Submitted by:-
Asso. Prof. (Dr.) Kondaiah J. Roll No. - 2009 B.A. LL.B. Enrollment No. A-0 VIII Trimester III Year
TABLE OF CONTENTS
1 Introduction 3
2 Understanding the Concept 3 2.1 Conceptual Conundrum 3 2.2 Methods of ‘buy-back’ 3
3 Law Governing Repurchase Of Shares In India 4 3.1 Introduction 4 3.2 Rationale behind Section 77 4 3.3 Objectives Of A Buy-back 5 3.4 Resources of Buy-back 5 3.5 Conditions of Buy-back 6 3.6 Sources from where the Shares can be purchased 6 3.7 Procedure 7
4 Law Governing Repurchase Under English Law 8
5 Law governing Repurchase under U.S. Law 8
6 The Debate: Pros and Cons 9
7 Conclusion 11
8 Bibliography 13 *
Introduction
The issue of a company buying back its shares has moved beyond the realm of abstract discussion among academicians and into the real world of corporate controversies. The endeavour should be to provide one with an overview of the concept of ‘buy-back’ of shares, the ensuing debate and some recommendations.
Understanding the Concept
In law, a company being a separate legal personality is capable of buying and holding property in its own name. a corollary to this privilege would be that a company could buy its own shares, shares being considered in all legal regimes as property.
Conceptual Conundrum
It is clear that conceptually, repurchase of shares runs counter to the age-old concept of separate legal personality. A company’s incorporating gives it a legal personality distinct from its shareholders. So, traditionally it was thought that repurchase of its own shares would negate that very distinction since a company would then become its own shareholder. But, modern times have witnessed a structural change in the theme and philosophy of Company Law
Bibliography: * Singh, Avtar. Company Law. 15th ed. Lucknow: Eastern Book, 2007.. Statutory compilation * The Companies Act, 1956 [ 2 ]. Under Section 82 of the Companies Act, 1956, shares are movable property. [ 3 ]. This term is used for repurchased shares in the Model Business Corporation Act in USA (1971 Version). [ 6 ]. Buckley on the Company Acts (London: buttersworth & Co., 1949) 243. [ 26 ]. Naresh Kumar, ‘Buying Back of Shares’, SEBI & Corporate Laws Magazine, Nov. 1994:120 [ 27 ] [ 28 ]. U.P. Mathur, ‘Emerging International Laws: corporate Law’ Chartered Secretary Vol. XXXIV, no.4, Oct. 2008: 891. [ 30 ]. Nitish Sengupta, ‘buyback of Shares of Companies’, The Economic Time, Nov. 2, 1994, 91. [ 31 ]. Sanjay Bakshi, ‘The Otherside of Share Repurchases’, Economic Times, 3 Nov. 2009: 4 [ 32 ]