Joint Stock Compnaies (Theroy)

1. Purposes for which share premium accoount can be applied ;-

    (i) For issuing fully paid bonus shares

    (ii) For writing off preliminary expenses

    (iii) For writing off expenses of the commission paid or discount allowed on any             issue of shares or debenture of the co.

    (iv) For providing premium payable on the redemption of any redeemable                         preference shares or debentures of the co.

2. Conditions of buy-back :- u/s 77A(2)

    (i) the buy-back should be less than 25% of the total paid-up capital and free                   reserves of the co.    

    (ii) The buy-back of equity shares in any financial year should not exceed 25% of its     total paid-up equity capital in that financial year

    (iii) The Co. (Amendment) Act, 2001 has authorized the buy-back by means of a               resolution at the co's Board provided the buy-back does not exceed 10% of the             total paid-up equity capital and free reserves of the co. But, there cannot be more           than one such buy-back in a period of 365 days.

    (iv) Debt-equity ratio shall not exceed 2:1 after such buy-back. The Central Govt.             may prescribe higher ratio for higher classes of company.

    (v) All the shares or other specified securities are fully paid-up

    (vi) The buy-back of the shares or other securities listed on any recognized stock           exchange is in accordance with the regulations made by the SEBI in this behalf.

    (vii) The buy-back of unlisted shares is in accordance of prescribed guidelines.

3. Sources of buy-back:- u/s 77A read with 77B(2)
    (i) It's free reserve
    (ii) Securities premium account
    (iii) Proceeds of any shares or other specified securities
    However no buy-back shall be made out of the proceeds of an earlier issue of the same kind of shares or same kind of other specified securities.