What is the primary purpose of a buy-back in a company?

To provide an exit option for shareholders and enhance Earnings per Share (EPS).

Fill in the blank: Buy-backs are governed by section ___ of the Companies Act, 2013.

68

True or False: Buy-backs can be financed using proceeds from a previous issuance of similar shares.

False - Buy-back cannot be financed using proceeds from a previous issuance of similar shares.

Fill in the blank: Buy-backs can be conducted through a tender offer or through the ___ via book-building process.

Open market

What are the conditions that must be met for a company to conduct a buy-back?

Conditions for a company's buy-back

• Articles of Association approval required.

• Limit on percentage of shares allowed.

• Maintain debt-equity ratio after buy-back.

True or False: A Capital Redemption Reserve Account must be created only when shares are repurchased from the market.

False - It must be created when shares are repurchased from free reserves or the securities premium account.

What must be done with the repurchased shares within a specified timeframe?

They must be extinguished and destroyed.

What is a potential negative impact of a buy-back for shareholders?

It can manipulate financial indicators and reduce the number of shares available in the market.

True or False: Buy-backs are a common response to overvaluation in capital markets.

False - Buy-backs are responses to undervaluation in capital markets.

Fill in the blank: Buy-backs are limited by the percentage of shares that can be bought back in a ___ year.

Financial

Describe one restriction on buy-backs under the Companies Act.

Buy-backs are prohibited if there are defaults in repayment obligations or filing requirements.