.s t” r n ega n e s i e t y . ] r n a e pue i d or oc n t hI rcTt oA[ u he. o t t2h 4 u a arCg o u ep Bo hr r t orh d et eCps a c gi e Pi s aa t ,i r s uBVr o“Ie c rv k e no i t s n eo sbeU neml oh a er i tSt t i f;n d eome n oC ro e f iCo i . t l i B r d e a r eeo m d f fe m o y s a l si t r v s c g e e i r o crt r cys P uld h sg eS gu nC no gB i i C mrs o e lh ) d e s t r hh s e i wt t ks no re e e vvom oebe eseS e hh h6 Tt T(
Preface to Seventh Edition
,I , )r st a I eI n he be tmt ol n u edcd nOe me h tm hc a t eA1 S r ( t s1n ge do nn i e et i t t aa n o updN om e c nc coo n aCi , t a ) a dd d c ne i fiu as i i G t v ye o r e o Nh eR t ( h4 s, r T9 i .da1 r f 0 d f 2 eaA d s . i n , t0 v e c a 2 et t A0 r a S 2 rt ), ygo l npnt h i rec gt omA un e ouCdc ro nn oc f ea o hc t n A mi y A n r (F ert e ees sh e bpii n s i nt saM a ad d he pn ,ma s ki 7 I ov 1on oe0Co br2 i , s n,8 se i t1v i h i ec0D TbA2 g n i h c a e t y t i s r e v i n U i h l e D . fs o n o si e t s ge eg l l g o u Cs se l ub oa i r u a l va v fr o i e yh t l t u r co af f g en ht i t n ou t o lc u c fA k nt e aa hr t o p mr ao IC
. gry,rk no seo n m f i ogo n , n s3 i b t nn1 u a ai o0 e o r l h y t t P 2 s t s , y u e eet l c g t t m l e i a gAe l r dp oush s e tnm pe i fao rl n ob aokc Capnoo umi oot ,l t bt aot n r ev aeo C t hp dgeu t i n p p s h i eu e t m v t r f s i i or Pg o y r rIcwa e I e coI o s h f i e t s t Vdu l e gec ed ,t nme l i i e ek n omh ge c ic GL enh i S h t g ker ca at e paerr evpoum f s o eia g r l cn DP se d i atoni e Ai G n v r Cd eio o nmh f nI r d ei ont lp e so N r a oo . t t yt s f s Gl r e mn lM e a ao i t oec t B wiG l naGn , a . u y s -r nl u fr n r k u fii Ma nsgr T a ae ne e. i hr ti f r r t h a T gwM pu mde n an rayo Iapdms
e h t f o n o i t i d e t n e s e r p e h t g n i h s i l b u p r o f N N. Ae m Mi Xt Af To d eo hr i t e op t t lr u o fh k ns aa hn t i h ot si l w a k mo ao Ib
et vh ag hu o tr h b ge i r ma , ey mn oa sf i h, s gr uo or hr t e sh r c ou rs r e f i gd ne i g t i n l i b r po y dl i h o g vi ah e ob t l el da ah s mI . ny et l en be t sr a he. v tde r c ai on t f io f e nn i yt y r p m e e vr o Ec t
k o o b e h t f o t n e m e v o r p m i r o f y t i n u m m o c c i m e. dd ae cg ad e el hw t o mn ok rc f a sy nl ou i d t s e e gb gl l ui sw eh t i c v i nh i Iw
2 5 4 4 9 9 0 1 8 9 : e l i b o M
BHUSHAN KUMAR GOYAL
m o c . l i a m f f i d e r @ l a y o g n a h s u h b : l i a m E
I-5
Acknowledgement Dr. Nawang Gialchhen
Shri Ram College of Commerce
Ms. Sneha Suri Wadhwa
Hansraj College
Ms. Sonal Sharma
Hansraj College
Ms. Varda Sardana
Shri Ram College of Commerce
Ms. Richa Goel
Shri Ram College of Commerce
Ms. Saroj Joshi
Shri Ram College of Commerce
Sh. Dikshit Yadav
Shri Ram College of Commerce
Ms. Priyanka Aggarwal
Shri Ram College of Commerce
Dr. Tonika Rana
Daulat Ram College
Ms. Ritika
Shri Ram College of Commerce
Ms. Dipika Bansal
Shri Ram College of Commerce
Ms. Manpreet Sharma
Shri Ram College of Commerce
Ms. Jasmine Lamba
SGND Khalsa College
Sh. Venugopal
SGTB Khalsa College
Dr. Soumya Sharma
Daulat Ram College
Sh. Bibhu Prasad
SGTB Khalsa College
Ms. Rachan Kaur
SGTB Khalsa College
Dr. Madhu Jain
Maitreyi College
Ms. Ritika
Maitreyi College
Ms. Amla Gaur
Satyawati College
Ms. Anjali Daryal
Satyawati College
Ms. Vandana Goswami
Satyawati College
Sh. Raj Kumar
Satyawati College
Sh. Harish Kumar
Satyawati College (E)
I-7
T N E M E G D E L W O N K C A
I-8
Ms. Kusum Gupta
Lady Shri Ram College
Sh. Mohmd. Salahuddin
Kamla Nehru College
Ms. Navdeep Kaur
Shri Guru Govind Singh College of Commerce
Ms. Surjeet Sood
Shri Guru Govind Singh College of Commerce
Ms. Meenu Gupta
Shri Guru Govind Singh College of Commerce
Ms. Manju Bhatia
Shri Guru Govind Singh College of Commerce
Dr. Sunita
Daulat Ram College
Ms. Savita Sachdeva
I.P. College
Dr. Ashok Aggarwal
Dayal Singh College
Sh. V.P. Jain
Dayal Singh College
Dr. S.C. Panda
Satyawati College (Ev.)
Ms. Richa
Satyawati College (Ev.)
Ms. Shikha Gupta
Shaheed Bhagat Singh College
Ms. Vandana Dahiya
Shaheed Bhagat Singh College
Ms. Nikunj Aggarwal
Shaheed Bhagat Singh College
Sh. Ashok Gupta
P.G.D.A.V. College
Sh. Chetan Negi
P.G.D.A.V. College
Dr. N.K. Aggarwal
School of Open Learning
Ms. Vrinda Kapoor
Janaki Devi Mahavidyalaya
Ms. Nidhi Gupta
Gargi College
Ms. Soma Garg
Maharaja Agrasen College
Sh. Arun Zulka
Maharaja Agrasen College
Ms. Arushi Zareen
Bharati College
Ms. Anu Jain
Aditi Mahavidyalaya
Sh. Satish C. Bhatia
Zakir Husain College (E)
Dr. Pakeeza Samed
Zakir Husain College (E)
Dr. Shivani Abrol
Zakir Husain College (Mor.)
Dr. N.K.Oberoi
Swami Shraddhanand College
Sh. R.K. Batra
Sri Aurobindo College (E)
Sh. Bhupinder Kumar
Delhi College of Arts and Commerce
Ms. N. Tiwari
S.P.M. College
Ms. Priyanka
S.P.M. College
Ms. Neerja Arya
College of Vocational Studies
Ms. Shikha Gupta
Keshav Mahavidyalaya
Ms. Geeta Sidharth
Gargi College
Ms. Deepika Kakkar
Dayal Singh College (Evening)
T N E M E G D E L W O N K C A
Dr. Vishal Pandey
Ramjas College
Sh. Himanshu Sekhar
Ramanujan College
Ms. Archna Chauhan
Ramanujan College
Sh. Arunesh Chaudhri
Kirori Mal College
Dr. Sunil
Deen Dayal Upadhyaya College
Dr. Deepak Sehgal
Deen Dayal Upadhyaya College
Dr. Sucheta Gauba
Lakshmibai College
Ms. Patinder Kaur
Hansraj College
Ms. Garima Jidal
Hansraj College
Ms. Anjula Bansal
Kalindi College
Dr. Renu Gupta
Jesus & Mary College
Dr. Rajendra Kumar
Rajdhani College
Dr. K.M. Bansal
B.R. Ambedkar College
Mr. Deepak Balani
Sri Aurobindo College
Ms. Lavleen Gupta
Hindu College
Ms. Anjali Siwal
Gargi College
Ms. Amita Malhotra
Lakshmibai College
Dr. Laxman Paliwal
Swami Shraddhanand College
Ms. Deepti Sehgal
Deen Dayal Upadhyaya College
Dr. Ram Gopal
Swami Shraddhanand College
Ms. Neha Singhal
Sri Venkateswara College
Ms. Raman Arora
Daulat Ram College
Sh. Krishan Kant
Lakshmibai College
Ms. Khushboo Aggarwal
P.G.D.A.V. College
Sh. Panna Lal
P.G.D.A.V. College
Ms. Neerja
P.G.D.A.V. College
Sh. Riyaz Ali
Swami Shraddhanand College
Ms. Shikha Gupta
Kamala Nehru College
Ms. Neha Mittal
Satyawati College
Dr. Rajeev Kaur
Aditi Mahavidyalaya
Ms. Sarabpreet Kaur
S.G.G.S. College of Commerce
Dr. Gurminder Kaur
S.G.G.S. College of Commerce
Ms. Manpreet Kaur
S.G.G.S. College of Commerce
Dr. D.R. Jalwani
Swami Shraddhanand College
Dr. Mohinder Paul
Ramanujan College
Ms. Komal Mittal
Kalindi College
I-9
T N E M E G D E L W O N K C A
I-10
Dr. Chhavi Sharma
Shivaji College
Ms. Divya Gupta
Motilal Nehru College
Dr. Kishore Kumar
Delhi College of Arts and Commerce
Dr. Anuj Jain
Delhi College of Arts and Commerce
Dr. Awadesh
P.G.D.A.V. College (E)
Dr. Rita Vats
Aryabhatta College
Dr. Rakesh Kumar Khosla
Tutor - Shahdara
Ms. Rishika Nayyar
Sri Aurobindo College
Ms. Ankita Singhal
Sri Aurobindo College
Ms. Shasta Gupta
Sri Aurobindo College
Ms. Rishika Nayyar
Sri Aurobindo College
Ms. Manmeet
SGND Khalsa College
Ms. Sonia Dhingra
P.G.D.A.V. College (E)
Ms. A. Porchelvi
Lakshmi Bai College
Ms. Amita Motwani
Jesus and Mary College
Ms. Priyanka Sahni
Maitreyi College
Ms. Radhika Goel
S.G.T.B. Khalsa College
Ms. Anupreet Kaur
S.G.T.B. Khalsa College
Ms. Arpita Paul
Sri Venkateshwara College
Ms. Meenu
Deshbandhu College
Sh. Harsh Khanna
Tutor - Pitampura
Dr. Deepak Srivastava
Keshav Mahavidyalaya
Dr. Deepti Singh
Motilal Nehru College
Dr. Bal Kishan
S.G.G.S. College of Commerce
Dr. Manju Khosla
Gargi College
Ms. Parul Tomar
Kamla Nehru College
Ms. Rashi Paliwal
Aditi Mahavidyalaya
Ms. Manisha
Janki Devi Mahavidalaya
Dr. Urmila Bharati
Zakir Husain Delhi College
Sh. Aditya Wadhwa
DDU College
Ms. Manpreet Kaur
Mata Sundri College for Women
Dr. Harshmeeta Kaur Soni
Mata Sundri College for Women
Sh. Ashish Jain
Sri Venkateswara College
Dr. Mamta Bhushan
Kamla Nehru College
Contents
Page
Preface to Seventh Edition
I-5
Acknowledgement
I-7
Syllabus
I-13
CHAPTER 1
u INTRODUCTION
1.1
CHAPTER 2 u
ISSUE, FORFEITURE AND REISSUE OF SHARES
2.1
CHAPTER 3 u
ISSUE OF RIGHTS AND BONUS SHARES
3.1
CHAPTER 4/5 u
EMPLOYEE STOCK OPTION PLAN
4/5.1
CHAPTER 6 u
REDEMPTION OF PREFERENCE SHARES
6.1
CHAPTER 7 u
BUY-BACK OF SHARES
7.1
CHAPTER 8 u
ISSUE AND REDEMPTION OF DEBENTURES
8.1
CHAPTER 9 u
FINANCIAL STATEMENTS OF COMPANIES
9.1
CHAPTER 10 u
CASH FLOW STATEMENT
10.1
CHAPTER 11
u AMALGAMATION
11.1
CHAPTER 12 u
INTERNAL RECONSTRUCTION
12.1
CHAPTER 13 u
ACCOUNTS OF HOLDING/PARENT COMPANIES
I-11
13.1
Contents
Page
CHAPTER 1 u
THEORY QUESTIONS
1.1
CHAPTER 2 u
ACCOUNTING FOR SHARE CAPITAL
2.1
CHAPTER 3 u
EMPLOYEE STOCK OPTION PLAN
3.1
CHAPTER 4 u
REDEMPTION OF PREFERENCE SHARES
4.1
CHAPTER 5 u
BUY BACK OF SHARES
5.1
CHAPTER 6 u
ISSUE AND REDEMPTION OF DEBENTURES
6.1
CHAPTER 7 u
FINANCIAL STATEMENTS OF COMPANIES
7.1
CHAPTER 8 u
CASH FLOW STATEMENT
8.1
CHAPTER 9
u AMALGAMATION
9.1
CHAPTER 10 u
INTERNAL RECONSTRUCTION
10.1
CHAPTER 11 u
BANKING COMPANIES*
11.1
CHAPTER 12 u
ACCOUNTS OF HOLDING COMPANIES
12.1
QUESTION PAPERS
B.COM. CBCS SEM-IV (MAY 2018)
P.1
u
B.COM. CBCS SEM-IV (MAY 2019)
P.27
. y t i s r e v i n U i h l e D n i m o C . B f o s u b a l l y S w e n e h t n i t o n s i s e i n a p m o C g n i k n a B f o s t n u o c c A *
u
I-5
7
C H A P T E R
BUY-BACK OF SHARES LEARNING OBJECTIVES
After studying this chapter, the students will be able to understand Meaning and objectives/advantages of buy-back of shares Sources of buy-back of shares
Conditions for buy-back of shares
Prohibition of buy-back of shares in certain cases
SEBI Regulations for buy-back of shares
Buy-back methods
Accounting treatment for buy-back of shares
,myr ,hrdsd9 . t e e c e e c e 9 r obb i df i Ar m9 a h s n i o 1 h e c a w u t sfr r eesf e sac n p i r e d O f i h s n e r e o s aa s ts hros s e phf1 s k l we i a can mso3 ha ,t a I onknpe b Bp scoC c w o a y m n a d uEo twan bn eobSc n hfy a i 9 e , t o d 6 r u 9 d d s r 5 o i nkbs 9o e e f 9 i 1 t r cee 1i s s a r sah e , l t n P h e bt , h c t oc si r f aydeAt o s A f h n hue i ) o t sbv e t wv s o s e froyneor a i o pn orbet c p a m r f pdd i de ean k hpi cdae n h u e ants e httms , bans o t e m s i k i mes y t A,cuCi 8 h uema a ( r 9 eu n bdr bTh ws9 c e1y .te rte t i s n v u c oe n nns , oe r f bo ae tG f fp iio s f t b ni 8 o i oslemot d 9k r a i s ot 9 n e r s c i c d C t i 1 p o h a O v e n t c0 b t o e t t 1 raeoh i n y s pnCtt i ma 1 1 u e e 3 b s3rt oeh ci h.er ne . n e T p b r f f t . c. o e .a e s n f e . r . o ado i wrow t t d s e wat h r n t c t w e d o c eeeonv i e e s e i t r r sj du t ca e e e b enq c l uu i ht ht aeen ud t a f s g s a f oe r sn e psr yto e r u t l i o p e l m n n e i B r a C t i n a o moi n i r p . c . i c a e o 6 8 u g t r m 5 9cec i r eo e r 9h 9eh e ew O1 c s tc1bt
Section 68 of the Companies Act, 2013 gives power to company to purchase its own shares and other specified securities.
Buy back of shares means purchase of its own shares by a company:
o t e v a h y e h t , y n a p m o c a y b k c a b t h g u o b e r a
7.1
, ss e u r h a hT s. y nn ea hp Wm o c e h t y b d e l l e c n a c e b
MEANING OF BUY-BACK OF SHARES
t yn ne ai pi c f mf ou cs g An i .v y na ah py n ma op cm eo hc t A f. o t n le a S t m i E p t R as e A cv H n S ei rf F a O h o K se. s se C A nor B ipa - erh Y us sp U a B e en rh w c eto r do s t fi ns i ey sr t au l hb u sso e nt r we k d o i cs c at e bi d yyy uua bbm t o en r h a ns haa scc 7.2
: s e r a h s f o k c a b y u b f o s e g a t n a v d a / s e v i t c e j b o e h t e b y a m g n i w o l l o f e h T
OBJECTIVES/ADVANTAGES OF BUY-BACK
. e d h e t l l s e c a s n g a n c i e n r r a a k e c s a ’ . b ys n t ae h r g pa u mh o os b cf no e i r r a ne ob h i m c t i u u h l i n w d g s on e ni r d a sn h ia s et e rt s e h h u t t o s f a i e eh g r t n a i s d he l sc o r u h e d s p e r sr e g t s o ne i r m n a o rh r as p ef eo e s s k a a ec e r r a c c b nn i i y o ou T Tb ) ) ( ( a
b
ee h ht t nn i i ,y e l cl i a r i pc e ep r s a he sh , et r ho t nw es ht wi n sa e gh nt as hs ce xl s ei kt , cn oe t s m ee hg t a nn oa em cy i r n pa ep r m. a t hoe sck eer a hh t t tfm r d ooe pns po s e ui r si np op e Tod ) ( c
k c a b y u b e h t s a y n a p m o c e h t r e v o e k a t o t d i b . eg l i n t i s d ol ho eh ks ar e mt oo t m so r r e hp t e o h et ge as r a ue r oc cn s i i d l l oi Tw ) ( d
r o f t i d e e n t o n s e o d y n a p m o c e h t n e h w s r e d l o h e r a h s e h t o t h s a c s u. l s p s re un si ys au pb e oh Tt ) ( e
e c i r p r e h g i h y l l a i t n a t s b u s t a s e r a h s f o k c a b y u b y b s r e d l o h e r . a e hc sr i ep ht t e dk r ra a wm en r a oh Tt ) (
f
: k c a b y u b f o s n o i t a t i m i l e h t e r a g n i w o l l o f e h T
LIMITATIONS OF BUY-BACK
e s a c n i g n i d l o . hs es r e l a hs si g cn i l i b d uo l ph ee hr t a sh e s s c a i el r b . c u g ep n d i e d sh a ut r hn t t r de e h nw d a i s y n gl n i l i a r d i o l c f o e l hp o s s o r e t e , s a t o e s m i n a a op d r e p m s u so e c e s b a d ee y r t a c s i nl m i f t I to I ) ) ( ( a
b
: k c a b y u b f o n o i s i v o r p e h t e r a g n i w o l l o f e h T
LEGAL PROVISIONS OF BUY-BACK
y n a p m o c a s w o l l a 3: 1s 0t 2i f ,o t c t Au so e s i e n i ai t pr mu c oe Cs ed he t i f i fc o e 8p 6s r ne oh i t t o c ed Sn a s e r a h s n w o s t i y u b o t 1. Sources of buy-back:
yf no as d fe o e kc co ar bp e y h ut bf ,o r e t vu eo we od Ha .m s e e i t b i r t uo cn en s a dc es i e f i i t c i er pu c r se r o e s ; h t d te n i u of o rc i c oe s c e p a r s a m h re e u s ht h i t yo m n f r e aro o r foe p o su ; s s s e s e e r s v i t dai e i r r r ehe e u csl i s c ofr e e roa r e s pde e e n e h n i hk r a f t t ) ) ) ( ( ( i
ii
iii
s d n o b , s e r u t n e b e d , s e r a h s f o e u s s i n o m u i m e r p s e d u l c n. i t n te n um ou cr ct s An i ml ua i i c mn ea r n Pi sf e r i e t i h r ut co er So
same kind of shares or same kind of other securities.
le fa o v nr ti e u ms oo e enR nen oh o dt i t sop i tm k cle aad bue q eR y uta l bnt i up eo r a e mC ha“ w o nt ,a 3 1 d n 0e e 2h r r ,te t f ,s c t An n ua so r e i ct n ace pab t mms ouu Cim m ee k hr t pc a f s b o e i t t 9i h 6r g uu nc oe o i s b t c r s eo e s r sa oe t h vs gr nef s i o d e rr e o u e ce l cr a Af v
,s 5 u 5n no ob i t d c i ea s p ry e l l pu sf f Ao .e t e u es hs Si r eo cf ny al l n a S B o E d R ee A hs t H u S ne F i b O dn K ea C s oc A l B t c n s Y i u U d o B c ec bA t s e uv r me s le i a R t e n do i st t p i m de nd ae ”R t n ls . uae t oi r cp a cah ACs 7.3
” s e v r e s e r e e r f “ 8 6 n o i t c e s f o s e s o p r u p e h t r o f . t ,n 8 6u o nc c oa i t c em s u i om t e r p s e i t i r u c e s s e rd e u pl c sn Ai Explanation II
. s e s n e: ps xe er a dh es s i f t r oo k mc aa nb uy du nb ar so e f s s e l ob l a gi l na i t v s ua j t d o an re e r t f a a , s dr ee t h a t l o u ct l s a g cn eo bm da l u s e ov hr se s se e vr r g e n s i e w r o el l eo r FF . t c A x a t e m o c n I e h t r e d e n v r n u e e o s d v e i e t r r t a t e a r s n n e o r e u o r e p c i o v t r c n p o r s c o m e c e i a s v t n r e p d e i e d R e o m e s t t e e r i n e r r d e f o o i e r r y i r u o t r r a p o l t f u a n t e l t t u i e r a i f t b a v o p a a e h e r t C D S R P S ) ) ) ) ) ) ( ( ( ( ( ( a
b
c
d
e
.i sd esertd” u ciroo r rs a nho ta u i hwl eTfet w e v r .b r irpso 3 r e woraf f e u 1 f e s 0ys e r “ 2aey c d d r n n e e A,m sa a i t i s r c prav .A a y r r ” ea madl n e t ce vsaf ec r epio rrn c n i e e m n s se ed mee e aoe a e ih hbs r pc b t “ e n m ts s f o i moado a a c fyt rCo t e eiheuh t e hf h bh s o t cb c ehr r i i s . htosp h de h e t f t l a i c v dwunwr eoe e nIrsrtoats p i i i a m i w f f eD f e mo l o uwr e r u r r s s o dd f pe ope f vc teo h h e e l o h r dcyh l ht ea ncr urts t f Sa sr o e sf r , , o a ro r e s t u ooBecerf r d h dFes ha i ot yT or sr p hal 3 e u t o a .m 1l t Fea 3 v 0b tt e y r r 2aas .e d1o as h n0f ,Tt s e t dmv ea2t f c , n s r r t mc Aoe o eye n 2i s bdne s s8 ia atAd o e r v r p i s c i l es n ene d m u s s i au d e sn a o i i r pa yo s a c w p n ml aFp m aee oc y gemn hh o Ct gt tnloa b n i e t aCp det i he d d T m d e e Ta nni ho ,t eassh m c t msau g e eemv g ufe bs h nooot r h i o t e uc h t na r tl s t t i y a al er e e wA pb cc r s Meaning of “Reserve” and “Free Reserves” f
Reserve.
inter alia,
. 3 1 0 2 , t c A s e i n a p m o C e h t f o I I I e l u d e h c S o t e d a m e b o s l a n a c e c n e r e f e r r e h t r u F
rs e a h t n r uw fo h ts I e b l l a h s s s o L d n a t i f o r P
,t d n nu eo dc i c v i A d s ss a o nL od i t n u ba i t r i f t s o i r d P rr oe f d en vu r e t i s f e o r r fp o s s ee s c ux ne or i se nh ot i t n c i i a r t t e s r e r y el l a r r a . e t enn r eu e o hgc t sc e A si n Aa s .pl u mp r ou cS er ho t Thus, carried forward profit of the company, i.e. accumulated profit of past years would constitute “surplus”’ and not “reserve” f o . ” s tu n l ep mr u es t “ a ‘ t S d a fe o h e ce nh at l r a e bd tn i u b ee dr u tg a i hf t e sv e i t ba i r g c e s n e r pa
The Schedule III prescribes that “surplus” refers to Balance of the Statement of Profit and Loss after disclosing allocations and appropriations made by the company such as dividend, bonus shares, transfer to reserves and transfer from reserves.
rss e e ni don ia nt uc ep dsm eeo nm C i f oe e dsh nt. yi f l n o l o s a i ceAt v i c f 2e r i 7s e c es3t pe a srnh eot i te t o rc f nf e o s so, e ate s o w c s p e nr ”ca u s n t e esp vr n i re d e f e rt s e o i e r r Fm e i l . er d eee r r wro f if “ eus r qe ne ev oh r i r s Tse s s e .ae r p6wr 5 x9 e n e1 e or i e, f tt i hc n d TAi e f e n sd i e f i e n ahd c pu 6 ms 5 9 o Ce1 r e , t eh c hw A t Free Reserves.
s e i n a p m o C e h t f o ) ( 2 n o i t c e s o t g n i d r o c c A
, 3 1 0 2 , t c A
43 “Free reserves” means such reserves which, as per the latest audited balance sheet of a company, are available for distribution as dividend:
S E R A H S F O K C A B Y U B
7.4
(i) any amount representing unrealised gains, notional gains or revaluation of assets, whether shown as a reserve or otherwise, or
” drss e eed e ndi v i n r f uve e o s re dsp r sa aene r oe we i r t hc f 6 “ 5we, 9,s8 d 1e y6 n r ,i n t c uai o s Aqs t eec srl e e ns i su n f aa,o pwe s s mnn e s ooeo Cisp t i n c r ef i i u r he p e t dne r eh e egt dh ntnr uhio ft d . ce ”i ,n s h e nl e u i vwf o r epc e rdmc s osaa e f ix r e ei trm es u eo r p3oi f r1Fm “ e u0.r n np2o ,ip o t e i t s s hcae s A r t i e t e i r t s r l pre a u xoi c efnce yai s l p f el i ha c s t cme e o i pd f ,i Cs s u uc l e e r c hp on hf Ts t i
: s w o l l o f s a s e d i v o r p 8 6 n o i t c e s o t
l ”a s r e t i t n i r ue cC ee s h t dy eb i f i d c e ei pf si t “ o ,n 0 7e nb oy i a t c em s s da s ne ai t )r i 8 6u c ne os i r t c e eh s t o r (o . nne o oi m i tt t i p c eoo s kt sc i e o h t m t s i f’t s o e m se o e yr s o f ol pp t r n ume pem sn ee hd r t e uv l rc o on G Fi Explanation I
— Provided that
(ii) any change in carrying amount of an asset or of a liability recognised in equity, including surplus in profit and loss account on measurement of the asset or the liability at fair value, shall not be treated as free reserve.
Meaning of Specified Securities
i.e.
. ” s e i t i r u c e s d e i f i c e p s “ s a d e i f i t o n n e e b r a f o s s a h y t i r u c e s o N
.d dss eee n r i r a f a i has c ; eshe pfsr so f a rdoh e s k h n cy i t ai k o t bu dre y q nh ue at . s sobfe e for fo r o a ka h cs h ea e su s obe fs o sp-c y i r n k uue r b ce p r ai e l r br eo f e ahf y r uetdp re bfo f ,of u 3 so 1s s k 0dei d e c 2e a a e ,cmb b t o c y r y Ap sa u e b s i m e t e i hr i r n t o usf a e c f r po ea d s m h e ot su u d Coe s ei s ic f e e i ne hd c t e aer b p fms e o y f a e 8efr m 6bop nnd,s e oa nl e i r cip t k a c srmh ee s as e i t xy rr he i e t t i puoru croq se As oFe Meaning of “Proceeds of any shares or other specified securities”
s nfe eos heo Wup l r a .v u d p e ure a sp v s i i f ser h e t o r f a n ha y se l n e hmo t od se fl o s au e e us e. l ab a 3 vc 1 0 rsn2 a i a h c, pt t nnmc aiuA esi s mdme e i e n ser a dcp p eo s ere m cpi o o tC i rer h pt ue ,, ch r met a pusf eo i tm s a u dea2 erc5 upen stbo a s i i t , d c de ee e r us u a ssn s si s i i e r s d e a e e hrr n saa o shi ne t sn er ha ee hh Ws tm
te a h ht t s ss e e l dn i v ou rs pi e t i 3r 1u 0c 2e ,s t c d Ae i f sc i e i e n ap ps r me oh t Co er ho t s fe o r a 8h 6s nn ow : i t od c e e s i Si t f s i t ea s s a he cr r ua ps n lo l i a t hi sd n yo nc a pg n mi ow co l l oo nf 2. Conditions for buy-back:
g nh n i oc i u t s s i u r l e o o n h s o t e u r y a l y an n go n a i t p s u s B m a . o pk c y c elb a ha b st tr fo y . otou t s gec b e h n e l t h i c r t i c fi e t r eoDu a fs m%o r s l 0 t o i a1df ry y roa b et n n o d epBa p e gue s s n m i i ho i r kt o dc ,c h ea y s t e n b s u h at a ay . r e pupea b nbmse i e t e eory c o s h a u bt h e t n m sfhu a i i t , k hr fad o c ne ye a ov aw b i te m o u w l y l l g o a u o n s H b e s i i t . e rk e k r l e c c a a m a h ia c b b s e s t e py y i h su u tb T Ab a ) ) ( ( a
b
paid up equity capital
and free reserves
(c) The buy-back must be equal to or less than 25% (i.e. not more than 25%) of the total paid-up capital and free reserves of the company. (Resource Test)
(d) Further, the buy-back of equity shares in any financial year must not exceed 25% of its paid-up equity capital in that financial year. (Share outstanding Test)
efm hor t s e e t s t s r a o l c h rs os sa s l l a e l c w as ra ot f b te b ed dm fr o e t og i t n a o r l rh e t ho gb i h e ad u el bc i n r i c s d e l r u po yht ) ass mee r T te ’ n y ehi t ’ mt u b ne q rD E e ‘ ‘ v. ’ t os b Gee i n la D a ‘ ( r pt t m n b eoe Cc d e g n . a p . f u hl ca d x h i ee a p kb y ci s o l l t h s u t f yn e ni b aI t nB s E u oS d m ee t s h k i t l c s a e y b i b te i y r d u u a b c r em o ss f dn s eo e fi i i i t t c a i e r l u pu s g c r e e e r s he d t h e o t fi r i h ot c e si p ew s re r ac h e s n h e a t h o d t r r f o o o c s kc e ca r an a bi h e s y e ub t h bs t eu l hm l T A ) ) ( (
. ter tsd s s e e n e e i un r t a wh p ma t s a o epe l eh g r s e c nma bes aoh i lhh l hCs T i cef .t w ) xh o n e r et i ( a k r kfc d e e coa ynt o7b a lal t a 1y )d s i d c d e ( u e n, el b n u ) z a i i R nca ( h n i l sp fr g.t odi ae x cew nbe eb s i i n r l r tme a yc n . s nse uuen n b aed o t o ei nr4 n mi vi t op1 ao ad 0 de2 kphn eb, ceyo t y s a v ec as i e b l ohl l mu t a bTr y o .u uas nsR ben sa) d h s s e et oe e e r i r c l r t r a a i o e huu d h r srt spnp fen. f s o e s h o d a o c e e ttbi td l t e c t hD l n es i et a r t e u pi c a t swdu ol c e d e u ene mc r eb a s l c aa l nn l y i ld a a kaae mccm t s u cdi fi e e i arp m b s r boac i n u c y Ce x p o y g c a i uaes aim t f i r r me bna d e sn ei e e hehh hrno t S o h Tb( o T c i t t r i ed ) e h h nt t ( foO o c : s m r o n g n i w o l l o f e h t ,h 7 t 1i ew l , u s r Re h dt i o a s t e s r g on f o a em ha t , y ol t p gm no i d rc ol l ca ch As
ee r h ot f n e i br e ,f l l f a o hf so nr oe i t t t u e l l o sa e s r e i ln a a i c ep pm so C af yo br a dr t es s i i g r oe hR. t e ee u ahf t nhe h et eit bwh t ei si l a w hfg , s n hr e o ca i l h ha wsm fr yo o n f akd pce a mbb i ogr cn c is ey e hur Tbp ) ( i
S E R A H S F O K C A B Y U B
h
d n ma n ih a st s r r y e e a t da d l l o 5 ht 1. o yn r ne t i af t f r ho uu t cb f s s ee s o s e i r l rn e t oa t o t sp nl e r m . e fe s doe o h l Ci o d t hfn of a i eop o r r rm e h a a pc hr t sto aa C s i eg rp f o he s o fi t oRr nd a t ef er po t dhs ot e eti hhg na t ci e i d t R ae w a mh p e e seh t i r m t d l m l h a eat o bsi h r e w s f lh l s t a k g y ca hgn snl a i d i b r fi l fi e 0 y s f 3 t r f u i e o g t m bi n ff a o o fd r oe ryf r l e e e e t s f f c t t y a x e a oe i l edd et he1 ho Tm2 Tn ) ) ( (
sn ee o r i t a ie hr b sul cl. ee ak hs hc t a yrsb r boe s t d e dr h l ea g o r u hho e e s f r f b fa o o g hn s s r e i e i re t be i b r umpr cueo encf s d lne a a dt t r eo p e fit ef f i eco c ehcs ptae sner raha e hth , ht s y t l en o a r t roao ompt m sso e e h i r t scf a hreo e h sd t t fl u y o o bo h ry s ki e s tca bi a r mu bb uc tt e ne h a esgn r u ho o o t i t sbr er s e o e a hp dt cl o oor nh I tp ) (
sin y r o au i t dc c e 5ej 1se dr ne i f fio h i t c i wen po i ds t era . r ve ce i hif e ctnf eouo r rme somh r t sof e e f co r f a o ae ehsr u hss e e s t l o hn ft l o c due nn dh oa et i t a rtf cepo e f fif ce i c o t r aa e ee d vh etbe hfoh t t o t eed m t r e o uer l p smf oes ml ocey ceda lhed l tb1 a l2 hfl soa n i yehh ntst aadi pde w mege h dd ot o c a l m eo m s hr e s i Tf t i ) (
e ds ne ah mt uf so es ar m ir nt ene pet oen hi ,t r k e p c f f ua o b eeky hau t mb fdr o lo euf o r d uwe ss r oa e l d c ,n eme hut t ss e rhr e ca t uh f s a ,s n yi e l h e e t t r a e r i h o d t f et n i ms o i mot ipa r lee d l a d hds i snn yao n c a s p a m e o l b c . s ae e yl h au T pr ) (
— e m i t d e b i r c s e r p e h t n i h t i w l l a h s y n a p m o c e h T ) (
u c e s e s o h w s r e d l o h e r a h s e s o h t o t e s a c n i n o i t r a o r ; e d de i t s p ne oc cc fa o n te n e eb me yv aa ph es ke i at i mr ) (
vii
-
ii
-
iv
separate
vi
-
a
7.5 (e) The ratio of secured and unsecured debt owed by the company must not be more than twice the capital and its free reserves after such buy-back However,
f
g
Note :
private companies and unlisted public companies
iii
v
-
bank account
S E R A H S F O K C A B Y U B
7.6
. te o c nn et a vp ae hc sc e a i t t i r r a up cf eo s e es s a oc hn wi s se r i t e i dr l u o c he es r e a h ht sf eo he t c n oa t l sa e b t a e ch fit i r t o r l e l ca t ea r a d he sp t ee hc t c na rn ue t e e b r ) (
b
s -en i y h o ut i n—b t e og l i t p e n u i h ;m t l t k o a o cc t ss fa e r tobr lny-o y e t a uf i i ms s c bt i eee t em pa ch i st et l hsnre y cr em e i di h h ot t nt wa ue tn dh a a l et ;s gps x a t ne c i h t a c n e d eafrn u lp a mya br i ; ek ede c he tba t iaob fn t m a o y du pl le e m a co db i ne t f c o coeh t na t n ei eer r hb ye ut si Tto d rn slu uc u c s mi ed e ddst eefs o s t e s e v s l a . s nk ppa i c eml bocea ebb och y t ou dtt dn ea tb s n e l ol ;uh k pu cot pf amf u sabao 3. Notice of the meeting:
(b)
(a)
(d)
(c)
(e)
. sd hr t a n oo mB e 2h 1t y nb i h d t i e ws s da ep t n e l o p i t mu l oo cs e er br to s un o mi t u kl co as be r yl ui a bc e yp r s e ve Eh t f o g n i s s a p f o e t a d e h t m o r f 4. Completion of buy-back:
s a r e o drt l ot o ht ,n ee a r u ks a hrr sau gmp nny i t e n s pa i x p eom eeo hhc t t e mmh oot r rf f f o s e :re eoy o b ; l sp i ys aa m mbe. y t keoi cttu aa q bnde o e i u y t t r s uo a s e bp i w eoss e hri Tpt r i o r au n nco e os i t p s e o r h e k dtc l o go hi nt ss ya f t i ho r c ur e cu m ep e s h ryc obs
, . t f r e y dai d r r o a h b e e v a o , e t r s t r a o i i e y t c d d f s n u l s e e i i b o gg en qlf r an i oe eafsp gd r c Iai r aoi eR sBna cfsgr i n Eaf f o e e i ah s ySya bg i d t n a t o aebeti s nnh phdhir u t aoi ettem mti mdw p a f e o ohi h t t r t ct e a y t s n I i e l i hl n ewvinns i.tto h y o r d e h t o r i y o t b nd ,nnini t u i a k e wc l p l lr ei cadqo ea n f ape r t i hae i n bmb Ds ln e o s l i b y a v r e u fmr l ucc f o o o s d bde oa t aesdh hs n er et rwsi pemia hs r t i e d y l edo eofsc o baf g B o r m n nf e h o e y e i e e d n w k a v svn h em l as o r o oaet ys h ma , r yy nn st c a yebnp i ecae a r reb n f d i m h oi tepmo Dt f r m t o o e o p n c n f h o Bdf n o o c c i l aeoi a d l t hdhi a e a f , r ho rtrwwnt a ana l d o o ri f e fs c i t o e yBont s a a i d cetar sc g l s r a enhu e e onh l Rets i c t v i t t e c tr l ee i ,, ld a i eoh r re e b hst i a fd ao vg t f i en o l t s a hnc a seowh t e t t w o i o f c yiat f wt i x e ngdtHe a er eanes.k y i a l p a t he i hm nc l e f t t la c e o eoom fa tft od o t tc is yf oo r t n s o e i de t l yp l l a m co i s c y hf po de nt aa hd ss t i u a gl ne i t h x et f to s u s my ya nd an pe mv oe cs en hh i Tt i w k c a b t h g u o b
7. Extinguishment of securities:
s e i t i . r k uc ca eb s y eu hb t
,s se sss e e utr r r n n a a u a t hhor n ssbr e a fw fo so b t i e fdyo fd o na r i w o kk n c os aeys i e bmbr r a ateh y uspvs bfene c o o x c c aee n s su e sa e r s h t e s e t i hf l n e cr p ro u mem sp h ot f cr 6so n u yf on f i n o t aeoa i s pk gr d i e maol i b v omr on e ctp o o gc an nr i etat o r s s ni e ui sy hm h bi t t i W uu t iwsq ,so fe s e t e i i t t ea i i r ge r uurw ccas e h es e cm s . s s i dd de ee ei hr i fec a f i i hsh c c eetns pp y ssnoi i t i t rrp re u e q hooe ht t oeko o c u ot st rrs n ooi si
rr s oa l su e c r i a t r ha sp ee hh t t kg cn ai bi n s a t y n uo bc or ht e ws i yg ne ar pa mn i oa ct n ei ha Tm o t d e r i u q e r s. i s si e e t i i t r i r u uc ce es s k dc ea i fb i c t eh pg su ro e b hf t o o
yI nB aE pS mh ot ci w e ho t s l ,a k c ad n . ba n ( y o i urt ba e l rp t fs o im g neo oRc i t h e ec l hu p mts hf ot o ci s ewy hma t rd ro 0 e f3 t f Aen b i i h r t c i s w e r ) py en ha t p nm i o nc rd ue t t e s r i l aa ef l o i f e os t a sc a n hi
r o y l t c e r i d l l a h s y n a: ps e mt i or i cu c oe ns td a e hi t f i sc e e dp i s v or re ph t 3o 1 0r 2o s ,e t c r Aa h ss e i n n aw po ms t oi Ce s ea hh t c fr o u 0p 7y l t nc oe i r t i c d en Si
Prohibition of buy-back in certain cases
(c)
(a) (b)
5. Methods of buy-back:
6. Declaration of insolvency:
8. Further issue of securities:
9. Register of bought back securities:
10. Filing of return of buy back:
S E R A H S F O K C A B Y U B
f po mn t ee r d o m e ; r s y r , e a i n o p. n ; oe a s e k rn e p i r ra e m n hob o a t , c p e d r y m uno r o den d a c t o i i s i v d t t e i i n u s d r t b e e i t u m tfs o n t s s i t n n i r n e l w v oea i o n smc i t s f iyn s a t o op a i n g p p i n u erf o d i o ,y d fs r o n u g ea l r tro c a n n o e ht i s n y y me o n n e a a ycr a n p p p ee m m er h e t o o rf t c c ne i s t y n e grr p r e n e a r i m t i t o s d n t i s i i s s s e e r b b v r o u u u n st s i n n s a y y i eo n n l tb l a a u em h h adr g g ffe u u eot o o dny r r ao n h t h ft t iia ) ) ) ( ( ( -
c
seddn t hnni i t ea) ehd s s i) ,s tv ai ido hw d nL c e r fd d do ue n ia i pl v t i n d ype t i l f tm m e o o c t r ecyu r P ab t i pi o d f ro nn(t i 3s s i t ra2d n oh1 e nom t yyo l n e i t ea t at c c r epe t uS r m S l i i d o,a d ) cn F l n ( l r e a a u 7t hht 2e ste fr1e yi lnh nsa ae oS piuie t t n i c mr n c e n ouaS a cc f e l a ) oson BI . ndgo I i ent fI ti i o f l a a i i e r f hc l anu t e(l od p i ds2ct e 9 e ah e r rc de nda i f o h v pS i o ott eh c roe srt prS ypi a(w rofd 9e e so 2 he c 01 t r n n r a a o3 uh n i d fs nor s i i i o v t s h n i c c t oi wr ec to pwSa I ee cb i t o o nt d ee hs t o tp a ho r t p : e s di g i n v i okt rca pas t b t y un be m ge na t i d t rs ,a 9 y 9gr 9eo 1rt a ,nn s o a nt i l ou p i t lx a o l se u e n gr a el Ra y ib )c s ed e p i e t si i n r uha ccp eim h Sw o c f c o ta a k cge anb Bil t l e a ye h u Bms (ed e Ihs Bts Efa So p d
e
f
g
i
ii
rn oo i i r t pa s . hmn r t o o n i f on t i s mii gu 6n q ti c s d a ua l l f ec o hne t i d r kt n o ca a f ad sb , g e d -h e ny t r iud d e : d bn l s o e r a n r o e hf e a r t c i h e i nr e s b hop i t r o i dte u t e h l h d no t t e asd , s e r s n r o e e o r p l f i i f a o t u i o r c c q p a ec o s sp t a e nss a s r ee r d a r n h tha t r e s e i fh t f ho s n o i f t g no r m fi e r u os se t s t o l i n ab a m a pm t o u e eu r q d hn p e et e h hon h t tto t ) ) f ( ( i ) ( c
e b l l a h s k c s a e b r a y h u s b f o e h k t c r a e b d s y t n c u u ; a b f k d c k h l e a a c s i i b c h a r e h - a w y b t c u a r y t u b u m a p e b l e l e h f c a b t o i r f r o o e n p ; t d o m k e c i d n t r u e u a e u l s b d p m d o y n e i m x l e t c u o a t s s n c m b i i e d v e y n r r o e h t i i f o t t e r e l t e r u b i p c o c m r i m f e o i s t l p o c y t f t t c i n n i s o u d s f u i s n e c a c s o o e a m m e l . pe l n c a a s l d u f e e e e ea h t h t h t h t hm a t ) ) ) ) ) ) ( ( ( ( ( ( b
a
d e i f i c e p s r e h t o d n a s e r a h s f o k c a b y u b
srfe r o e e hbrl d sme o i wubh e tnmr i a heuh chns t i h feh h I c w. t a s tr n e a a e m h edt o cl o i r r hef r pe k oc arm a sa h b e ssi xs t i h f teg yicu i r nmp o ao b pr de mft er s a oe a cr t s e easr hhea t shh dfts oote hrah t e kt e cn mba e m bh s u t i y nu , h k t c rdba e e i rb f di ot nc f h Ue pdg. e u sr y l o e af e bt kf a coen asbo o be i t t r r y s o e uar p bha s o r fhp oo s t ) 1 (
o w t g n i w o l l o f e h t n i e n o d s i k c a b y u b , d o h t e m s i h t r e d n U
: s y a w
(2) Open Market Purchases:
f o s d o h t e m n i a m e h t e r a g n i w: oe s l l i o t i f r u ec he Ts
BUY-BACK METHODS
7.7 a
b
SEBI REGULATIONS
inter alia,
Tender Method:
S E R A H S F O K C A B Y U B
7.8
-nsah tie ye epi is t nk grt i ar p r a a mw pa o h h e e og mmdh cc t r o t e n uea cga d h d ph i nt h ev ei etc eo hl iic t rhfx a o s t dvexp,le e o k oerest rc hrateu p t o h n o t ont sni e l ef ros e mho sd tcn e t oieno s k u r t i i dg e rs a h y l t b eIan n e m cB mi rg oo e se dnurEkr nanpSced Uhdt.opa e t c k :xekcsrm o r n e a e e i a s b h b r km crmytel l ot e euhta t hbgoh s e u m s dtr o o eo df s rr en hr e hp t r t e a csea. hp k i h h e gec r y s t r p uha t a fl i otb hmo i m rsc soka he yuf r t s c um f f o a bi sh eag e xkdbi n c o c r a r t a aayd u hudmbmb a spe r e d y t de ti ki ubec h c cl n i eibttn al o i f o m d bt ndr rol e t lnc s y e e l c y aae t l s i ur a e a hyl bp ndc sne (a) Open Market through Stock Exchange
-
-
”r ysersesed t r e e o r ce vr ne c i i f a be ad t td ar a l pl s m hppe e l r e moe s u u s k t cp ohdnymfcc o a cel e n r e a o c haurb aa h e c c e byc a ,hetp s e d r i m u d m r h e bp oean r hhhaotu c a e t s t h n t e h e s oeg e cmt s e hi e mt h n h t h s s r a T e ga swuei sr r m x d h . i h a i i e tx eb h if s “ hrc a t e a i y s a es e s nf hrh nh dma I o ospt th r eg p e rrh a dw e hmn etn wt b p i s n soar nv m 5 i c i d o e e e h u4t eei cd n iceeh l e r c c o dowri Tph x r et r . e e p r e i e k c f e 0 r t trc i i f f 4 a o s r c f pAesao h e b l s .wa p syako e uymh aagcl u ut ksnaeqb i e b , m t l ce hd oi l o y t ag a t n e bnuu sio r aqbme m e t y s urdrof fo i r fi d o e o f b bc o f a spep o a oi dee r t rg c ei er rp rpk ra ne e ep d hyab a f f e f r s n l f mo df i l o a f e . a e o k ph niosr hc r acte t e s e m e a r f d spe n f h a boi b e s o c c h t kai h m i y s t eu ei at v h u fh hw no ma wb tnt i (b) Open Market through Book-building process:
s n o i t c a s n a r t t o p s , s l a e d d e t a i t o g e n h g u o r h t k c a b y u b e h t t i m r e pt . tn o e nm oe dc a sl e np i l e e t da i v u i gr Ip Bd En Sa
y u b r o f s e i r t n e l a n r u o j g n i s s a p e l i h w d n i m n i t p e k e b d l u o h s s t n i o p: s e gr na i wh os l f l o o f k ec ha Tb
ACCOUNTING TREATMENT
`
`
y a m y n a p m o cs t ai t a h: t f so e t du i v o os re pt i i 8r e 6u h ct ne os i t d c ei er Sf io rc e e i p l r s a r ee dt h eo t a r t o s ss e Ar a h s n w o s t i ke ch at b y ur bo . 1
Sources of buy-back :
s e r a h s y. t e i u s o qp er fu i ,p e l e p h mt ar xo ef d re ou f s ,s s ui he Tb y a m s e r a h s e c n e r e f e r p , k c a b t h g u o b e b o t e r a (i) free reserves; (ii) securities premium account; (iii) proceeds of any shares or other specified securities. However, no buy-back of any kind of shares or other specified securities shall be made out of the proceeds of an earlier issue of the same kind of shares or same kind of specified securities.
. ls a e t i r p a ah Cs s u n o b d i a p y l l u f g n i u s s i r o f y l n o d e s u e b n a c t n u o c c A e v r e s e R n o i t p m e d e R d e s o p o r p e r a h c i h w s e i t i r u c e s d e i f i c e p s . rp e u ht d o i ra op sy e l l r u a hf se eb hs t Tu m k c a b t h g u o b e b o t . 3 . 2
. 4
Transfer to CRR A/c : Section 69 provides that if the shares are bought-back out of free reserves, then an amount equal to the nominal value of the shares so boughtback must be transferred to the “Capital Redemption Reserve Account.”
Fully paid-up shares :
e b t o n n a c t i e c n e h d n a t i f o r p d e s i l a e r n u s t n e s e r p . es r e i et vr i r u e s c e e r s nf oo i t k a c ua l b a vy eu Rb r o f d e s u
Premium on buy-back : Premium (excess of buy-back price over the par value) paid on buy-back should be adjusted against free reserves and/or securities premium account.
f o n o i t p m e d e r e h t f o t a h: t s ow t o l l ro a f l i S m s E a i R ss A si H i S t s n F e e O r m a K t h C a se A B ft r o Y U g kn B ci at bn u y o uc bc fa o e th n eT . ms e tr a ea r h t s ge nc i t n n e r ue of ce cr Ap 7.9
ye l h lt u fg ti n o k na em r a r o sf e r y a r ht sn ee he t h ft i g ,n e r i s os f a e p r e hy Tb .p k cu d ai . l ba l a pc t h ye gl ul h u t of be f o edt bap i nme a c cee b r so e r t r o a ef hv d sa n dha i ye a peu hd yt l l l ,a l p u fuc l yda l i n n a i Op f (i) For making the partly paid shares fully paid
. r D
c / A l l a C l a n i F e r a h S o T
) y e n o m l l a c f o t p i e c e R (
c / A k n a B
) s d e e c o r p e l a s h t i w ( . r D
c / A s s o L d n a t i f o r P *
) e l a s n o s s o l h t i w ( . r D
(ii) For realizing investments to provide cash for buy-back ) (
n i f o e u) l d a l vo s ks ot on be m ht t i s we (v
c / A s s o L d n a t i f o r P * o T
) e l a s n o t i f o r p h t i w (
d l u o h s c / A k n a B , s e r a h s f o k c. ad be t y i ud e br rc oe f hb sd a l cu o eh ds i v oc r/ pA n oa t no eL kk an t a sB i nd an oa l kd e nt ai bb e fd I )e (b
. ds ne r aa sh e s r a y ht si eu cq ne ee r u e s f s e i r n pa ec ut si s , i s ne ar ca th i s , s e e c r n a e hr se yf t e i r u qp ek c ka cb aby u y ub bo ot t s se e d dc i i c ee dd yy nn aa pp mm oo cc ee h ht t fi f I (iii) For fresh issue of other kind of shares
If the company decides to make a fresh issue of preference shares as a source of buy-back of equity shares, the following journal entries will be passed :
. r D c / A n o i t a c i l p p A e r a h S e c n e r e f c e / r A P k o n T a B ) (
(a) When shares are issued at par
-
c / A s t n e m t s e v n I o T
. r a e p p a y a m o w t e h t f o r e h t i E *
he sc a a l cp en di i r v oo ro pt on t o i dt i l d o sd sa i n )i t d e s e s t i a d te n r ec r e r ub cd l ru oo th e s s t s e a s . ds e eab xa ty i f ha ( ttm e ne s es s ha a t r,c s e e e hr h t t a o h s es a , mfs t oon ske fcm a I bt )s (y e uv bn i rf oo f ii
i
. r D
c / A k n a B
. yt bn u po uc dc i a a pk n ya l l b u ff eo r d a a he st s yn t i i u d qe et i pb ue dd i e a pb l yi l l t w r a ) y pl l ea ku ad mv i i od t n di e( s s ue v er r e a s se e r ve r e e r s f e , r s eu en r o f fb I f o y a w Note :
a
c / A l a t i p a C e r a h S o T ) e u d e d a m l l a c l a n i F ( ) (
b
c / A l l a C l a n i F e r a h S ) (
a
Note : i
) d e v i e c e r y e n o m n o i t a c i l p p a e h t g n i e B (
S E R A H S F O K C A B Y U B
7.10
c / A l a t i p a C e r a h S e c n e r e f e r P o T
t n e m t o l l a n o y e n o m n o n o i t a c i l p p a e r a ) s he sr fa o h rs e e f c s nn e ar r e t f ge nr i p e Bf (o c / A l a t i p a C e r a h S e c n e r e f e r P o T
) e u l a v l a n i m o n h t i w (
c / A m u i m e r P s e i t i r u c e S o T
) m u i m e r p s e i t i r u c e s h t i w ( n o i t a c i l ) p s pe r aa eh r s a f ho st n fe o m rt e o f l s l na an r o t y ge nn i e o B (m
de er na eh pS of eo bd ya ae t ms n ti n u, oy ce cn Ao tm n n eo mt i ta o c l l i l A p dp na ae nr a oh i t s a cs i a l p d pe Al l ea r c a . st hi n St u dn o euc no c i b mA man oli o clt u a Afc i nl ep hp wA r o c / A k c a B y u B e r a h S y t i u q E
. r D
c / A s r e d l o h e r a h S y t i u q E
c / A k n a B o T
) s e r a h s f o k c a b y u b r o f t n e m y a p g n i e B (
, r s r 4n e e o 1i i t f 0e r f t 2rna e n ,h oye s i l e t t e l g a t t u r n i a e i Rs i dd w )oi p s e o s e en l ml r o o udc mf d t n e sih d ena et bae n e s l ee b D s apa d yoc n a e a pb h l c a lu dl t n i a p ahs: a n s e y i C r ut, t e dne n r u r a oe of mc h d u e S i scra ( a e s s es he e r iT i ai r h t n o .f annTr .e peek a fe mpec f h oohaot Cotbef p ho et y t hdu u e e e f t bo r k c fi a o uarel o )q mf rp 8 e un ( d d r si 7 l e o 1su r l d eio c e e l y des u nwn s ha Ra s e t rpat fp e so e pm,e somreb Acuatd s a h l :yh sdu r o c e eeh vuh hs es tt Note
. r D
c / A k n a B k c a B y u B e r a h S
(a) For opening separate bank account
. r D c / A n o i t a c i l p p A e r a h S e c n e r e f e r P o T
. r ) D d e v i e c e r y e n o m n o i t a c i l p p a e r a h s g n i e B ( c / A n o i t a c i l p p A e r a h S e c n e r e f e r P ) ( ii
c / A k n a B ) (
(b) When shares are issued at premium
i
c / A n o i t a c i l p p A e r a h S e c n e r e f e r P ) ( ii
Note:
(iv) For payment to equity shareholders
separate bank account
c / A k n a B o T
r o c / A k c a B y u B e r a h S y t i u q E (b) For payment
. r D
c / A s r e d l o h e r a h S y t i u q E
c / A k n a B k c a B y u B e r a h S o T
S E R A H S F O K C A B Y U B
) y l l a u d i v i d n i ( s e v r e s e R e e r F
c / A e v r e s e R n o i t p m e d e R l a t i p a C o T
k c a b t h g u o b s e r a h s f o e u l a v l a n i m o n f o r e f ) s c n/ aA r t gR nR i C e Bo (t
: s w o l l o f s a d e t a l u c l a c e b n a c c / A R R C o t r e f s n a r t r o e u s s i h s e r f f o t n u o m A
e lv a r t e i s p ae cr on o t i rp t t e n f m u s neo ad c r c ea Tr . r D c / A s r e d l o h e r a h S y t i u q E r o c / A k c a B y u B e r a h S y t i u q E o T ) s e r a h s k c a b t h g u o b f o n o i t a l l e c n a c g n i e B (
s e r a h s f o e u l a v l) a k nc i a mb ot nh hg t u i wo (b . r D
) (
c / A l a t i p a C e r a h S y t i u q E
(b) When shares are bought back at premium
+ k sc e a sr i b a hh y ss u e fb r o f f fdo o ne eis uko l rp a e r vh u lt p a o nfe i h mot e r ou o Ns f =
c / A l a t i p a C e r a h S y t i u q E
n o e l b a y a p m u i m) ek r c pa b ht y i wu (b . r D c / A k c a B y u B e r a h S n o m u i m e r P c / A s r e d l o h e r a h S y t i u q E r o c / A k c a B y u B e r a h S y t i u q E o T
) f f o n e t t i r w s e r a ) h s s e r c y a t / i h . . . A u r r s r q k e k D D D c c a k a ) y B c b l - a l t y a b h u t u g d B h u i g o v e i u r b d a o f n h b o I ( c S n n c / n o o / A i o t A m s a m s l s u l o i e u e v L i m c r n e d m r e a s n e p c r e R a P g g t i n n o i e f i T o e e e r r B B F P ( ( c / A m u i m e r P s e i t i r u c e S ) (
ii
-
t h eg uu l o a vb ls e a r na i k mhc s of a No b
i
. r . r D D
(v) For transfer of nominal value of shares redeemed out of free reserves and securities premium account to capital redemption reserve account c / A m u i m e r P s e i t i r u c e S
(a) When shares are bought back at par
7.11
(vi) For cancellation of shares bought back
s e r a h s f o e u l a v l a n i m o n h t i w ( . r D
c / A l a t i p a C e r a h S y t i u q E
(c) When shares are bought back at discount
) k c a b t h g u o b
r o c / A k c a B y u B e r a h S y t i u q E o T
) d i a p t n u o m a e h t h t i w (
c / A s r e d l o h e r a h S y t i u q E
n o t i f o r p
c / A e v r e s e R l a t i p a C o T
) k tc n a ub ocy s u i d b e hr t a i wh (s
i.e.
) s e r a h s k c a b t h g u o b f o n o i t a l l e c n a c g n i e B (
c / A k n a B o T
) s e s n e p x e k c a b y u b f o t n e m y a p g n i e B (
. r D
c / A s s o L d n a t i f o r P
c / A s e s n e p x E k c a B y u B o T
) f f o n e t t i r w s e s n e p x e k c a b y u b g n i e B (
)m ed@ne ce ogo i t i e r r t s r pl i muaf h b enoi e cg uuc r r t snn n ua s s ii i ad dsh rfe fdc: e viton , y u d o1 eaa e b x 6 ga s9 s i ms r a e t 1t t a r s e n n , a p i t e oa htdc e i sc trr A n r e oeuxa x b ha a s xpi t t e r t a a i t fe -t et r s si o hn emyad coa(fTe e p . i o c o g e r or em pnt w ag t kI o h d a cee t cg cn ahr n ni r bti ueiw f u c d o y qsr o u e%eel l t 2pu bAr1 o s f a b fQi 5 i o s e r 1t i a h t s1 ( s , t s s i . e , ne d c e e co t r s xi e eo etam h , h c o p s tr eesc s fu e hsen t rhicop setdn%s i p i keo6 e h cti t7t u msab a A 3r bi c. o.o ru3F cs s t d2. ney s r f i i e u e a o dh bd%l m es i ye4a t h t ent u dto o s afnt bo t i p o a r h a e ) t ) m t % s x m ( i 0a fo2 i Do c t t (viii) For transfer of buy-back expenses
. r D
c / A k c a B y u B e r a h S r o f e m o c n I d e t u b i r t s i D n o x a T a For payment
c / A k n a B o T
) (
. r D
c / A s u l p r u S r o c / A s s o L d n a t i f o r P b For transfer of the tax
) s s o L d n a t i f o r P f o t n e m e t a t S e h t n i e c n a l a B s u l p r u S (
c / A k c a B y u B e r a h S r o f e m o c n I d e t u b i r t s i D n o x a T o T i.e.
. r D
c / A s e s n e p x E k c a B y u B
(vii) For payment of buy-back expenses
@
ILLUSTRATION 1. (Buy-back of shares out of free reserves at premium)
RS (P) Ltd. purchases 50,000 equity shares of ` each ` 40 per share. No fresh issue is made for this purpose. There is a balance of ` 50 lakhs in General Reserve Account. Pass journal entries in the books of the company in accordance with the provisions of company law : 0 1
0 0 0 , 0 0 , 0 2
Cr. (`) Dr. (`)
c / A k n a B k c a B y u B e r a h S
. r D
L.F. Particulars
Date
S E R A H S F O K C A B Y U B
7.12
(ix) For payment of tax on distributed income
plus
i.e.
SOLUTION
In the books of RS Ltd.
JOURNAL ENTRIES
0 0 0 , 0 0 , 0 2
c / A k n a B o T
) d e n e p o k c a b y u b r o f t n u o c c a k n a b e t a r a p e S (
0 0 0 , 0 0 , 0 2
. r D
c / A k c a B y u B e r a h S y t i u q E
0 0 0 , 0 0 , 0 2
c / A k n a B k c a B y u B e r a h S o T
) n o i t a l l e c n a c r o f s e r a h s 0 0 0 , 0 5 f o e s a h c r u P (
S E R A H S F O K C A B Y U B
0 0 0 , 0 0 , 0 2 0 0 0 , 0 0 , 5 1
. r D
0 0 0 , 0 0 , 5 1
c / A k c a B y u B e r a h S n o m u i m e r P o T
) k c a b y u b e r a h s n o m u i m e r p f o f f o g n i t i r w g n i e B (
0 0 0 , 0 0 , 5
. r D
c / A e v r e s e R l a r e n e G
0 0 0 , 0 0 , 5
c / A e v r e s e R n o i t p m e d e R l a t i p a C o T
k c a b t h g ut ) on bu so e c r c a hA se v fr o e es ue l R a vn li o a t np i mm e od ne fR o l ra e t f i s p na aC r Tt o (
8
0 1
0 0 0 , 0 0 , 8
Cr. (`) Dr. (`)
. r D
c / A k n a B k c a B y u B e r a h S
0 0 0 , 0 0 , 8
c / A k n a B o T
) s e r a h s f o k c a b y u b r o f d e n e p o t n u o c c a k n a b e t a r a p e S (
0 0 0 , 0 0 , 0 1
0 0 0 , 0 0 , 8 0 0 0 , 0 0 , 8
t a 0 1
. r D
c / A k n a B k c a B y u B e r a h S o T
. r ) D h c a e 8
c / A k c a B y u B e r a h S y t i u q E
f o s e r a h s y t i u q e 0 0 0 , 0 0 , 1 f o k c a b y u B (
c / A l a t i p a C e r a h S y t i u q E
0 0 0 , 0 0 , 8
c / A k c a B y u B e r a h S y t i u q E o T
0 0 0 , 0 0 , 2
c / A e v r e s e R l a t i p a C o T
f o s e r a h s y t i u q e 0 0 0 , 0 0 , 1 k c a b ) te h r ga uh os br e fp o n8 o i t t a a l l h e cc na ae C0 (1
`
0 0 0 , 0 0 , 5 1
0 1
c / A e v r e s e R l a r e n e G
` `
0 0 0 , 0 0 , 5
c / A k c a B y u B e r a h S y t i u q E o T
f o s e r a h s k c a b t h g u o b ) 0e 0r 0a , 0 h 5s r fe o p n0 o4 i t a l l @ e c nh ac Ca (e
Sangeeta Ltd., an unlisted company, had issued capital of ` 50 lakh divided into equity shares of ` 10 each. The balance in the Security Premium Account was ` 2 lakh and General Reserve ` lakh. The company decided to buy-back 1,00,000 shares of ` each at ` per share. The company had issued 50,000, 10% Preference Shares of ` 10 each 3 months back for the purpose of buy-back of equity shares. Record the transaction in the Journal of the company. 3
`
. r . r D D
c / A k c a B y u B e r a h S n o m u i m e r P
`
L.F. Particulars
Date
c / A l a t i p a C e r a h S y t i u q E `
Cr. (`) Dr. (`) L.F. Particulars Date
7.13
ILLUSTRATION 2. (Buy-back of shares at discount partly out of fresh issue and partly out of free reserves and securities premium)
SOLUTION
In the books of Sangeeta Ltd.
JOURNAL ENTRIES
0 0 8 , 1
0 6 1 , 1
3. Current liabilities
b
l a t o T
0 0 0 0 0 0 0 0 2 8 8 , 0 , 1 7
a
) k n a B t a h s a C ( ) e s t d n a e r l T a v n i i u s q k c e E l o b t h a S s v a ( i s e C c e i e d r n o R a t e n h e d s a v r a n T C I ) ) ) ( ( ( 2. Current Assets
0 0 5 5 0 1 , 4
3
b
0 0 0 , 7
l a t o T
a
) s t e s s A e ) l s b t i g n n e a m T t ( s t e n v e n I m ( p t s i u n q e E m t d s n e a v n t I n t a n l P e r , r y t u r C e p o n r o P N ) ) ( ( 1. Non-Current Assets
0 4 6 , 1
2. Non-Current Liabilities
0 0 4 , 2
1 2 ) s e s i r p r e t n e l l a m s d n a o r c i m n a h t r e h t o s r o t i d e r c o t e u d g n i d n a t s t u o l a t o T (
0 0 4 , 2
h c a e 0 1
f o s e r a h S y t i u q E h k a l 0 4 2
`
0 0 0 , 0 0 , 5
l ta u t oi dp ea mC eo et d em r u si e m r e a hr sP s ye t i i t u i qr ) eut fcn e o u eSo c udc l n a vaA e l e a v ve r nr i s ee ms oe nRR n flo o at i rr e ep f nm s nee aGd r e fR To ( b
` in lakhs Particulars
0 0 0 , 0 0 , 3
c / A e v r e s e R n o i t p m e d e R l a t i p a C o T
s e l b a y a p e d a r T
c
0 0 0 0 , 0 0 , 2
c / A e v r e s e R l a r e n e G
) s e r u t n e b e d % 0 1 ( s g n i w o r r o B m r e t g n o L
Subscribed and Fully Paid up
. r . r D D
c / A m u i m e r P s e i t i r u c e S
a
s u l p r u S l d a n t i a p a e s C v e e r r a s h e S R ) ) ( ( 1. Shareholders’ Funds
` in lakhs Note No. Particulars
Cr. (`) Dr. (`) L.F. Particulars Date
S E R A H S F O K C A B Y U B
7.14
ILLUSTRATION 3. (Buy-back of shares partly by issue of fresh shares and partly out of free reserve and securities premium) The Balance Sheet of Ishaan Ltd. as at 31st March 2020 is given below :
I. EQUITY AND LIABILITIES
II. ASSETS
Notes to Accounts
1. Share Capital
S E R A H S F O K C A B Y U B
7.15
Particulars
` in lakhs 0 0 0 5 5 4 3 9 3
a
b
c
0 4 6 , 1
) s s o L d n a t i f o r P f o t n e m e t a t s e h t t n n u i o e c c m c n u i a e A l m v s a e r s B e o r s . L e P e . s R d i e n s l a i t a u i l r r t p u e i f r c n o u e e r S S G P ( ) ) ) ( ( (
2. Reserves and Surplus
0 5 4 0 0 6 , 3
y r e n i h c a M
0 5 0 , 4
g n i d l i u B
3. Tangible Assets
On 1st April, 2020, the company announced the buy-back of 50 lakhs equity shares at ` 18 per share. For this purpose, it sold all its investments at a profit of 20% and issued 3 lakhs 12% preference shares of ` 100 each at a premium of 10 per cent, the entire amount being payable with application. The issue was fully subscribed and the company bought back the announced number of equity shares through open market purchases. Pass journal entries to record the above transactions in the books of the company assuming that the company is not a listed company. SOLUTION Date
Particulars
L.F.
0 8 1
. r D
c / A k n a B
Debit (`) in lakhs
Credit (`) in lakhs
) t n e m t s e v n I f o e l a s n o t i f o r P ( c / A s s o L d n a t i f o r P o T
0 0 5 3 1
c / A s t n e m t s e v n I o T ) % 0 2 f o t i f o r p a t a s t n e m t s e v n i f o e l a s g n i e B ( 0 3 3
. r D
c / A k n a B
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Basic Corporate Accounting Set of 2 Volumes AUTHOR PUBLISHER DATE OF PUBLICATION EDITION ISBN NO PAGE NO. BINDING TYPE
: BHUSHAN KUMAR GOYAL : TAXMANN : JANUARY 2022 : 7TH EDITION : 9789393656223 : 1166 : PAPERBACK
Rs. 875 | USD 48
Description Basic Corporate Accounting is a University Grants Commission (‘UGC’) recommended, comprehensive & authentic textbook. This book aims to fulfil the requirement of the following students of undergraduate courses in commerce and management: u B.Com. Semester IV, Paper BC 4.2 [Three Years (6-Semester)] under Choice Based Credit System Programme (‘CBCS’) u Non-Collegiate Women’s Education Board u School of Open Learning of University of Delhi u Various Central Universities throughout India The Present Publication is the 7 th Edition, authored by Bhushan Kumar Goyal, with the following noteworthy features: u This book is divided into two volumes: n [Volume I – Text & Illustrations] u Accounting Treatment as per Companies Act, 2013, and Accounting Standards u Prescribed format of Balance Sheet in questions as well as solutions u Covering Objective & Theory Questions n [Volume II – Assignments] incorporating the following: u Theory Questions with Answers u Practical Questions with Answers u Previous Year Questions with Answers u [Thoroughly Revised] as per the following: n Theory and accounting treatment has been revised as per Accounting Standards – 4 (Revised) n Companies (Amendment) Act, 2017 n Ministry of Corporate Affairs Notification dated 11 th October, 2018 n Companies (Amendment) Act 2019 n The Guidance Note on Schedule III, Division I n The Finance Act, 2020 u [Simple, Systematic and Comprehensive Explanation] of the concept and theories underlying Basic Corporate Accounting u [Student-Oriented Book] This book has been developed, keeping in mind the following factors: n Interaction of the author/teacher with their students in the classroom n Shaped by the author/teacher experience of more than 39 years n Reaction and responses of students have also been incorporated at different places in the book u [Illustrations for Better Understanding] have been given in each chapter u [Careful Selection of Illustrations] to cover all aspects of the topics u [Comprehensive Coverage of Accounting Treatment] has been provided, so that it becomes easy to solve practical problems u [Questions on Banking Companies] have been solved as per the latest RBI Guidelines
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