Buy Back of Shares.

What is Buyback of shares?

If a company has excessive Idle cash in General reserves they can use it for paying dividends to its shareholders or they can offer Buy Back of Shares to their Existing Shareholders.

When a company re-purchases its shares or securities from its existing shareholders, it is known as Buy Back of Shares. For Buy Back of Shares the company offers higher price than the market price. It is a method of cancellation of Share capital.

The Buy Back of Shares is governed by Section 68 of the companies act 2013.

• Who can participate in Buy Back of Shares?

The company which is offering Buy Back of Shares, only the existing  shareholders of that company can participate in the Buy Back of Shares.  

The shareholders must have the shares in their Demat account on the record date declared by the company, only then they can participate in the Buy Back of Shares. 

To apply for the Buy Back of Shares the shareholders have to submit a tender to the company. Shareholders can contact their brokers to apply for the Buy Back of Shares.

There are 2 application submission category.

1. Retail category: Value of holding shares up to 2 lac.

2. Non Retail category: Value of holding Shares is more than 2 lac.

• Benefits of Buy Back of Shares.

Buy Back of Shares is beneficial for company as well as for investors or shareholders.

The company offers higher price than the market price of the shares and this is the major advantage for shareholders.

The shareholders can book their profit without any risk.

Its helps to increase the value of the shares by re-purchasing the outstanding shares.

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