As per section 77A of the Companies
Act, 1956 a joint stock company has to fulfill the following conditions
to buy-back its own equity shares:
(a) The buy-back is authorised by its articles.
(b) A special resolution∗ has been passed in general meeting of the company authorising the buy-back.
(c) The buy-back does not exceed 25% of the total paid up capital and free reserves of the company. Provided the buy–back must not exceed 25% of its total paid up equity capital in that financial year.
(d) The ratio of the debt owed by the company is not more than twice the capital and its free reserves after such buy-back.
(e) All the shares for buy-back are fully paid up.
(f) The buy-back is made out of the free reserves (which include securities premium) or out of the proceeds of a fresh issue of any shares or other specified securities.
(g) The buy-back is completed within 12 months of the passing of the special resolution or a resolution passed by the Board.
(h) The buy-back of the shares listed on any recognised stock exchange is in accordance with the regulations made by the SEBI in this behalf.
(i) Before making such buy-back, a listed company has to file with the Registrar and the SEBI a declaration of solvency in the prescribed form.