Buyback of Shares

Buyback of shares means to buy own shares by company. By learning this term, you will think, is it foolish and stupid way to repay the fund which company has received in the form of share capital? No one returns fund after receiving. Simply, there is no logic of buyback of shares, but you will feel wonder after reading  this recent news.

Unum which is an insurance company  plans $1 billion buyback of shares. See its ref. at here. From reading of this news, you will be find that buyback of shares is the way to improve financial condition of company. One side by buying own shares, it shows company's investment and other side it also increases earning per share.

Moreover, in India, there are 77 A , 77 AA and 77 B provisions of Indian company act 1956 deal only with buyback of shares. SEBI regulations also lights on this matter. We find also it as useful tool for company because company can easily increase his ERP by just decreasing the numbers of shares. We know that ERP is ratio of  ( profit after interest and pref. dividend / No. of equity shares ) To decrease the number of shares by buyback of shares means to increase ERP. If we study above example, then

1. #  Unum Company wants to effective use of his capital reserves with buyback because all 1$ billion stock will be bought through its capital reserves. ( Note : But in India, it is not possible because company can use only free reserves for this purpose. )

2.  # This technique is also use to improve the market value of per share. ( Read last line of news : Unum's stock closed at $25.14 Wednesday, down 50 cents from the previous day's close. In after hours trading and following the earnings announcement, Unum's stock was up 8 cents)

How to Buyback of Equity shares :

1st Step : Pass special resolution

It is the first step, just call all shareholders and pass special resolution for buyback. Be aware whether AOA allows this or not.

2nd Step : Fix maximum limit of buyback of shares

Maximum limit of buyback of shares is 25% of paid up equity share capital and free reserves.

3rd Step : Fix the time limit of buyback of shares

Time should be given to shareholders for accepting the offer. It must be between 15 and 30 days of notice of buyback.

4th Step : Filling of declaration of solvency before buyback in newspaper

Before buyback, company should filling of declaration of solvency in newspaper.

5th Step : Use Only free reserves and securities premium for buyback of shares

Company can use only free reserves and securities premium for buyback of shares.

6th Step : Record buyback of shares in register of bought back.

All bought back shares must be recorded in special register and should keep in registered office of company.

COMMENTS

Comments on this Website
.
Share above Content to Your Friends



Name

access account accountant Accounting accounting definitions accounting ebook Accounting education accounting procedure accounting process outsourcing Accounting Software advance advertising africa Amalgamation amendments announcements Annuity assets audit auditing Australia B.Com. balance sheet bank Bank reconciliation banking basic accounting BBA benefits best bill black money blog bloggers book keeping bookkeeping Branch Accounting - full tutorial budget Budget variance business businessman CA calculator canada capital capital budgeting career cash cash book cash flow statement Chiense children china class coaching coins college commerce commerce students company computer computer accounting conference Contact vinod kumar corporate accounting cost cost accounting cost center cost centre CPA credit credit card cs currency data Debit and credit debit cards debt debtor degree depletion depreciation documents dollar domain Downloads Dubai e-accounting earning education Education Loans email employee EPF ERP euromoney examination excel excise duty expenses facebook factor of loan fans feature fifo FII fiji finacle finance Financial financial accounting fire insurance flickr flow forensic forex formula france fraud free fun function fund GAAP GDP gdr germany gold goodwill goodwill accounting google google apps google apps google base google buzz google calendar Google docs google finance google fusion tables google talk govt. GST guide health Hindi Hindi Language history holding company How to treat FBT in Tally 9 HRA ICAI ICAWI ICICI Bank IFRS income income statement Income Tax India indian railway Indonesia inflation inflation accounting infographics information inspiration insurance insurance accounting interest international Internet Introduction of Tally 9 inventory investment invoice IT Japan Job costing journal entries Kalculate keyboard kindle kuwait laptop law LBT learning lease lecture ledger leducation Leverage Analysis liabilities lifo linkedin loan logical point loss loss of profit M.Com. m.phil malaysia management accounting manual accounting manufacturing account market marketing mastercard material MBA MCA media migration mobile money ms word ms. excel multi currency in tally 9 Multicurrency Accounting mutual fund national security new and sacrifice ratio new york times new zealand news NGO nonprofit-accounting North Georgia Mountains NPV NSE odbc office oman online application online accounting otcei pakistan parents pay pal pdf pie chart pie chart of income pnb podcast ppf presentation price privacy policy prize money prof. vinod kumar profit profit and loss account project management provision purchase puzzles quickbooks Quote quotes quotes of svtuition rating agency ratio analysis RBI readers real estate rectification of errors remote control reports reserves responsibility accounting retirement revenue Revenue reserves review risk rupees salary sale saudi arabia saving sbi scholarship school SEBI security service tax share share trading Shares shri lanka singapore sms social accounting society solution South Africa stock stock exchange structure student students study subsidiary company svtuition swiss bank tally tally 9 Tally 7.2 Tally 9 Tally.ERP 9 tanzania tax Tax Accounting TDS teacher teaching technology test testimonial testimonials thailand tips trading trading on equity transaction trend trial balance tuition twitter UAE UGC - NET Commerce UK United Arab Emirates university usa valuation VAT Video Voucher and vouching wikipedia working capital youtube
false
ltr
item
Accounting Education: Buyback of Shares
Buyback of Shares
http://2.bp.blogspot.com/_DJEIRrK4tl4/TUrRGJjUsZI/AAAAAAAAGR0/2TkHC3mAki0/s1600/unum.PNG
http://2.bp.blogspot.com/_DJEIRrK4tl4/TUrRGJjUsZI/AAAAAAAAGR0/2TkHC3mAki0/s72-c/unum.PNG
Accounting Education
http://www.svtuition.org/2011/02/buyback-of-shares.html
http://www.svtuition.org/
http://www.svtuition.org/
http://www.svtuition.org/2011/02/buyback-of-shares.html
true
2410664366776677676
UTF-8
Not found any lecture VIEW ALL Readmore Reply Cancel reply Delete By Home PAGES Lectures View All RECOMMENDED FOR YOU Category ARCHIVE SEARCH ALL Lectures Not found any lecture match with your request, please help to write it and send it to our email at vinod@svtuition.org for making this website free accounting and finance encyclopedia. Back Home Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sun Mon Tue Wed Thu Fri Sat January February March April May June July August September October November December Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec just now 1 minute ago $$1$$ minutes ago 1 hour ago $$1$$ hours ago Yesterday $$1$$ days ago $$1$$ weeks ago more than 5 weeks ago Followers Follow THIS CONTENT IS PREMIUM Please share to unlock