Buyback of Shares under Section 68

Buyback services from Patron Accounting cover the eligibility tests, the board or special resolution, the SH form set, the separate account, payment to shareholders and the SH-11 return. It is a complex engagement with company-law limits and a shareholder-side tax that changed in October 2024. Our team has supported 10,000+ businesses since 2009.

A buyback is a capital-return action, the opposite of raising fresh capital through our issue of shares service. Where the company wants to reduce capital beyond the 25 percent buyback limit, that is a Section 66 capital reduction before the NCLT, a different route we can also advise on.

A buyback under Section 68 is available only when the company satisfies the quantum, leverage and timing conditions. These protect creditors and remaining shareholders.

• AOA authorisation: The Articles must authorise the buyback; if not, they are amended first.
• Quantum limit: The buyback cannot exceed 25 percent of paid-up capital and free reserves, and equity buyback in a year is read against 25 percent of paid-up equity capital.
• Approval threshold: Up to 10 percent needs a board resolution; up to 25 percent needs a special resolution.
• Leverage and paid-up: Post-buyback debt-equity must be within 2:1 and only fully paid-up shares can be bought back.
• Timing: Completed within one year of the resolution, with a one-year gap before the next offer.

A buyback beyond 25 percent is not a Section 68 buyback but a capital reduction under Section 66 before the NCLT, a different process we can also advise on.

• Latest audited financials showing reserves and net worth.
• Articles of Association and shareholder register.
• Board or special resolution and SH-8 letter of offer.
• SH-9 declaration of solvency and the debt-equity computation.
• List of tendering shareholders and acceptance records.
• Valid DSC of the signatory for ROC filings.

Need the full checklist? We share a ready buyback checklist when you engage us.

All fees and charges listed are indicative only and do not constitute a binding offer. Final amounts may vary depending on the volume of work and the complexity involved.

MCA filing fees, any valuation, and the tax on the distribution payable by shareholders are separate and charged or borne on actual basis. The exact fee depends on the buyback size, the source of funds and the offer mechanics. Contact us for a detailed quote.

Get a free Buyback of Shares consultation - Call +91 945 945 6700 or WhatsApp us. No-obligation assessment.

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"Patron ran our buyback to return surplus cash to investors, from the solvency declaration to the SH-11 return. Every limit was tested first." - Director, technology company, Bengaluru.

"We used a buyback to give an early investor an exit. Patron handled the resolutions, the offer and the extinguishment cleanly." - Founder, manufacturing company, Pune.

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With offices in Pune, Mumbai, Delhi, and Gurugram, Patron Accounting serves businesses across India - both in-person and remotely.

A buyback connects with other share capital and shareholder actions. Patron handles the linked work too.

• Issue of Shares for raising capital, the opposite of a buyback.
• Transfer of Shares for changes in shareholding between members.
• Change in Authorised Capital for capital clause changes.
• ITR for Capital Gains for the shareholder-side tax on the distribution.
• Private Limited Company Compliance for ongoing annual compliance.

Power and sources: Section 68 of the Companies Act, 2013 lets a company buy back its own shares out of free reserves, the securities premium account or the proceeds of a fresh issue of a different kind of shares.

Limits and conditions: The buyback cannot exceed 25 percent of paid-up capital and free reserves, the post-buyback debt-equity ratio must be within 2:1, only fully paid-up shares qualify, and the buyback must complete within one year with a one-year gap before the next offer.

Approval and forms: Up to 10 percent needs a board resolution and up to 25 percent a special resolution, with the SH-8 letter of offer, SH-9 declaration of solvency, SH-10 register, SH-11 return within 30 days and the SH-15 certificate signed by two directors.

Tax position: From 1 October 2024 the company-level buy-back tax under Section 115QA was withdrawn and buy-back proceeds are taxed in the shareholder’s hands as deemed dividend under Section 2(22)(f); as the fiscal treatment continues to evolve, the current-year position should be confirmed with a tax advisor.

Refer to the MCA portal for forms and to Section 68 on IndiaCode for the bare provision.

A buyback is hedged with hard limits. The 25 percent quantum, the 2:1 debt-equity test, the one-year completion and cooling-off, and the SH form set all have to align, and the shareholder-side tax changed in October 2024. Getting the structure and the timing right protects the company and the distribution.

Get a buyback assessment - Call +91 945 945 6700 or WhatsApp us. We respond within 2 hours.

A buyback under Section 68 returns surplus cash to shareholders by purchasing and extinguishing the company’s own shares, within the 25 percent quantum, the 2:1 debt-equity limit and a one-year window, through the SH-8 to SH-11 forms.

The company-law limits are exacting and the shareholder-side tax changed in October 2024, so the structure and the timing matter. Patron Accounting, with qualified CAs and CSs and offices in Pune, Mumbai, Delhi and Gurugram, runs the full buyback so the distribution is clean and compliant.

10,000+ Businesses | 4.9 Rating | 50,000+ Documents Filed | 15+ Years. Book a free consultation today.