Buyback – Vinod Kothari Consultants

Scope of partial business exit as a mode of scaling down a company

Mahak Agarwal | corplaw@vinodkothari.com

After the recent Finance Act of 2024 shifts the incidence of tax in case of buyback from the company to the shareholders, a pertinent question that arises is what could be the next best mode for a company which is looking to partially exit from business and scale itself down.

Here is a quick 5 min video analyzing the above: https://lnkd.in/gK6878qg

Also watch our video on the tax regime on buyback proposed by the Finance Bill, 2024 (now enacted as the Finance Act) here: https://lnkd.in/gu7NrbeM

Read our FAQs on Buyback here: https://lnkd.in/gTZx838x

Resource Centre on Buyback

August 12, 2024/0 Comments/in Corporate Laws, SEBI /by Team Corplaw

Date of Publication	Title	Author/ Speaker	Link
August 09th, 2024	FAQs on Share Buybacks	Team Corplaw	https://vinodkothari.com/2024/08/faqs-on-share-buybacks/
July 29th,2024	Discussion on Proposed tax regime on buyback	Vinod Kothari and Payal Agarwal	https://www.youtube.com/watch?v=RLC34F_qZkw
July 23rd,2024	Bye bye to Share Buybacks	Team Corplaw	https://vinodkothari.com/2024/07/bye-bye-to-share-buybacks/
February 10th, 2023	SEBI notifies amendments to all modes of Buy-back	Sanya Agrawal	https://vinodkothari.com/2023/02/sebi-notifies-amendments-to-all-modes-of-buy-back/
November 19th 2022(updated February 8th, 2023)	SEBI’s revised framework brings relaxation under buy-back norms	Payal Agarwal	https://vinodkothari.com/2022/11/ease-of-corporate-slimming-sebi-proposes-substantial-relaxation-of-buy-back-norms/
September 2022	Insight on the concept of Buyback of Securities (podcast)	Team Corplaw	https://open.spotify.com/episode/1Zs92WR7GNGWsIR89bTTBK
September 08th , 2021	Presentation on Buyback of securities	Harsh Juneja	https://vinodkothari.com/2021/09/buy-back-of-securities/
March 28th, 2020	Buy-back of shares during Covid-19 Pandemic	Vinita Nair	https://www.moneylife.in/article/share-buyback-during-covid19-pandemic/59865.html
September 22th, 2019	SEBI’s Buyback Rules For Leverage Limits	Team Corplaw	https://vinodkothari.com/2019/09/sebis-buyback-rules-for-leverage-limits/
September 11th, 2018	SEBI amends Buyback Regulations:-Aligning and re-framing the requirements with other laws	Nikita Snehil	https://vinodkothari.com/2018/09/sebi-amends-buyback-regulations-aligning-and-re-framing-the-requirements-with-other-laws/
April 02nd,2018	Proposed changes under SEBI(Buy-Back Of Securities) Regulations, 2018	Nikita Snehil	https://vinodkothari.com/2018/04/proposed-changes-under-sebi-buy-back-of-securities-regulations-2018/
March 27th, 2012	Guide to buy-back shares of unlisted companies	Team Corplaw	https://vinodkothari.com/2012/03/guide-to-buy-back-shares-of-unlisted-companies/

FAQs on Share Buybacks

August 9, 2024/0 Comments/in Companies Act 2013, Corporate Laws, SEBI /by Team Corplaw

-Team Corplaw | corplaw@vinodkothari.com

Uploaded version_FAQs on Buyback Download

Our other resources on the topic :

Bye bye to Share Buybacks

July 23, 2024/0 Comments/in Accounting and Taxation, Budget, Capital Markets, Corporate Laws, Direct Taxes, Financial Services /by Team Corplaw

– Finance Bill 2024 puts buybacks to a biting tax proposal w.e.f. 1st October, 2024

-Team Corplaw | corplaw@vinodkothari.com

Among the tax law changes proposed by Finance Bill, 2024, the one on share buybacks, explained as one intended to remove tax inequity, is perhaps the most unexplainable. The proposed change, by introduction of a new sub-clause (f) to section 2 (22) [deemed dividend], and simultaneous amendments to sec. 46A and sec. 115QA, not only shifts the tax burden from companies to shareholders, but surprisingly, brings to tax the entire amount paid on buyback, irrespective of the excess realised by the shareholder. It leaves the cost of shares to be claimed as capital loss and set off against potential capital gains, of course only if such gains arise within the prescribed timelines for carry forward and set off.

Buyback of shares is the only way a company seeks to scale down its capital. The proposed amendment makes it impossible for companies to reduce their capital base by returning capital not needed, as the only other way is through reduction of share capital, which is subject to shareholders’, creditors’, and NCLT approval. It is surprising that this amendment by the very same Budget which proposes to introduce the novel concept of “variable capital companies”.