| Question And Answer | |
|---|---|
| Subject: | Whether Buy back of preference shares /Equity shares for determining FMV concept of registered Valuer is compulsory ? |
| Category: | Income-Tax |
| Querist: | V.Surana |
| Answered by: | Advocate Rahul Hakani |
| Tags: | buy back of shares, Buyback of shares, valuation |
| Date: | May 15, 2021 |
A pvt ltd company wants to buyback both preference & equity shares at discount to the issued price. Is there any bar under the Companies act 2013 ? Further , whether to determine buyback price FMV concept through registered valuer compulsory , since ROC sometimes dont approve the forms
Kindly Refer to Section 68 to 70 of the Companies Act, 2013 and Rule 17 of the Companies (Share Capital and Debentures) Rules, 2014. A company can buy back securities at market value of the securities. Also, the company in its explanatory statement to the notice of general meeting for passing of a resolution and in its Form SH 8 to be filed with ROC, has to explain the basis of arriving at the buy back price, maximum amount of the buy back amongst others. Practically, no shareholders would approve buy back at a discounted price.Further, the Act nowhere mandates that the valuation report must be certified by a registered valuer only. A Chartered Accountant not being a registered valuer can also give a valuation report and it is not mandatory to file the valuation report in Form SH 8. Only the basis of arriving at the buy back price has to be explained in the Form SH8, without attaching the valuation report. However, the company must give a clarification letter that since it is not mandated by the Act to file a valuation report, the same has not been filed with the ROC.