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Companies Act, 1973 (Act No. 61 of 1973)

Chapter V: Share capital, Acquisition by Companies of own Shares, Shares, Allotment and Issue of Shares, Members and Register of Members, Debentures, Transfers, and Restrictions on Offering Shares for Sale

Acquisition by Companies of own Shares

85. Company may under certain circumstances acquire shares issued by it

 

 

1) Subject to the provisions of this section and any other applicable law, a company may by special resolution of the company, if authorised thereto by its articles, approve the acquisition of shares issued by the company.

 

2) The approval by special resolution may be general approval or a specific approval for a particular acquisition.

 

3) If the approval is a general approval, it shall be valid only until the next annual general meeting of the company, but it may be varied or revoked by special resolution by any general meeting of the company at any time prior to such annual general meeting.

 

4) A company shall not make any payment in whatever form to acquire any share issued by the company if there are reasonable grounds for believing that-
a) the company is, or would after the payment be, unable to pay its debts as they become due in the ordinary course of business; or
b) the consolidated assets of the company fairly valued would after the payment be less than the consolidated liabilities of the company.

 

5) In the case of the acquisition of par value shares issued by the company, the issued capital shall be decreased by an amount equal to the par value of the shares so acquired.

 

6) In the case of the acquisition of no par value shares issued by the company, the stated capital of the class of shares so acquired shall be decreased by an amount derived by multiplying the number of shares of that class so acquired with the amount arrived at by dividing the stated capital contributed by issued shares of that class by the number of issued shares of that class.

 

7) If par value shares are acquired at a premium over the par value, the premium may be paid out of reserves, including statutory non-distributable reserves.

 

8) Shares issued by a company and acquired under this section shall be cancelled as issued shares and restored to the status of authorised shares forthwith.

 

9) Shares in the capital of a company may not be acquired under this section if, as a result of such acquisition, there would no longer be any shares in issue other than convertible or redeemable shares.