Format of the certificate given by a company secretary in pr

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Pankaj Khodaskar (Querist)
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24 May 2013 Does any one have speciman of Certificate given by a Company secretary in Practice after completion of the Buy-Back under rule 10(2) ?

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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14 July 2013
SAMPLE SECRETARY’S CERTIFICATE
(For corporate stockholders)
To
______________________________ ) .
SECRETARY'S CERTIFICATE
I, _______________________, a duly elected and qualified Corporate Secretary of
____________________, a corporation duly organized and existing under and by virtue
of Philippine laws (the “Corporation”), do hereby certify that:
I am familiar with the facts herein certified and duly authorized to certify the
same;
At the meeting of Board of Directors of the Corporation duly held and convened
on ________________ at which meeting a quorum was present and acted throughout, the
following resolution was approved, and the same has not been annulled, revoked and
amended in any way whatsoever and the same is in full force and effect on the date
hereof:
“RESOLVED, That _______________ (the “Corporation”) authorize as it hereby
authorizes Mr./Ms.___________________ to sign, execute, issue and deliver for
and on behalf of the Corporation, proxy/ies over the shares owned by the
Corporation in ....................., in favor of
______________________ to vote the shares owned by the Corporation in FPHC at
the regular and/or special meeting(s) of the stockholders and any of their
adjournment(s) or postponement(s) and to do or cause to be done all such other
acts and things as may be proper or necessary arising out of or in connection with
the foregoing authority”
WITNESS THE SIGNATURE of the undersigned as such officer of the
Corporation this ______ day of _________________________ at _____________________.
____________________
Corporate Secretary
SUBSCRIBED AND

FURTHER YOU SHOULD KNOW
What is buy-back of securities:
Buy back means purchase of securities by a company from its shareholders. It is not purchase by promoters of company, but it is purchase of its shares by the company itself. Even promoters may participate in buy-back of securities and to that extent those managing companies need to be extra careful in discharging their duties of care and trustee towards funds of the company.

Objectives of buy back of securities:

Shareholder who surrenders securities (in case of shares, share certificates) in buy-back offer of a company expects to gain more than those who do not. Buy back of shares or other securities may affect liquidity of the company. Still, securities may be bought back by the company on account of one or more of the following reasons:

(i) to increase promoters' holding in the company

(ii) increase earning per shares(EPS), if operating efficiency is likely to increase despite reduced capital

(iii) rationalise the capital structure by writing off capital not represented by available assets

(iv) support share value – though in reality buy-back do not affect price much on stock market

(v) counter unwelcome/hostile takeover

(vi) to pay back surplus cash not required by business – sometimes also because promoter thinks that its best to invest company's funds in acquiring its own securities

Buy back of shares/securities may be carefully resorted or even may not be resorted when a company is in growth industry or information about a company in the market is contradictory.

Essential legal provisions for buy back of shares or specified securities:
For listed and unlisted companies:
(i) The Memorandum Articles of Association and Articles of Association of the Company

(ii) The Companies Act 1956 : sections 77A, 77AA and 77B (Section 80 for buy back of preference shares) and the Private Limited Company and Unlisted Public Limited Company (Buy-back of Securities) Rules, 1999 ('the Rules').

Alternative to buy-back can be by following procedure under the Companies Act for either (a) reduction of share capital (section 100) or (b) under a scheme of arrangement (Sections 391/394).

(iii) the Income Tax Act 1961: Capital Gains in hands of investors/shareholders. In case of non-resident shareholders, TDS may required to be deducted and may be at special rate. Reference to Double Taxation Avoidance Agreement may also be required.

(iv) the Foreign Exchange Management Act 1999

(v) For securities in demat form, Procedure of Depositories, namely CDSL and NSDL in co-ordination with Share Transfer Agent.

For listed companies:
(i) The Securities Exchange Board of India (SEBI): the SEBI (Buy-back of Securities) Regulations, 1998 ('the Regulations').

(ii) The listing agreement – particularly clauses 19(a), 20(c), 40A(vi) (to ensure minimum public shareholding)

(iii) the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations 1997 – if buy back results into increase in shareholding beyond various limits prescribed under takeover regulations.

(iv) the SEBI (Prohibition of Insider Trading) Regulations 1992 - Any person or an insider shall not deal in securities of the company on the basis of unpublished information relating to buy-back of shares or other specified securities of the company.

Prohibition on buy back of securities:
A company shall not directly or indirectly purchase its own shares or other specified securities-

(a) through any subsidiary company including its own subsidiary companies; or

(b) through any investment company or group of investments companies

Listed companies shall not buy-back its shares or other specified securities so as to delist its shares or other specified securities from the stock exchange.

Funds represented by which accounting head can be utilised for buy back of shares/securities:

A company can purchase its own securities from:-

(i) free reserves: Free reserves have the same meaning as under clause (b) of section 372A of the Companies Act. Where a company purchases its own shares (equity/preference) out of free reserves, then a sum equal to the nominal value of the shares so purchased shall be transferred to the capital redemption reserve and details of such transfer shall be disclosed in the balance-sheet; or

(ii) securities premium account; or

(iii) proceeds of any shares or other specified securities: However, a company cannot buy-back its shares or other specified securities out of the proceeds of an earlier issue of the same kind of shares or other specified securities.

In case of unlisted companies, the company shall not utilise any money borrowed from Banks/Financial Institutions for the purpose of buy back its shares/securities.

Buy back of shares/securities can be by a letter of offer or from open market:

The shares/securities can be bought back by a company from:

(a) existing share/security holders, on a proportionate basis.

Buy-back of shares/securities may be made by a tender offer through a letter of offer to the holders of shares of the company, or

(b) through a book building process of stock exchanges, or

from open stock exchanges; or

-from holders of odd lot shares.

In case of unlisted companies, only option (a) is available.

Conditions of buy back of securities:
(a) The buy-back is authorised by the Articles of Association of a company.

(b) With consent of shareholders by way of a special resolution in the general meeting of a company authorising the buy-back.

In the case of a listed company, (a) this approval is required by means of a postal ballot; and (b) the securities for buy-back should be free from lock in period/non transferability.

Alternatively, buy-back can also be made by obtaining consent of the Board of Directors, if the quantity of buy-back is or less than 10% of paid-up share capital and free reserves. If buy back is made by authority of board resolution, then company cannot make further offer of buy-back for next 365 days.

The resolutions passed for buy back are only an enabling one and a company is under no obligation to buyback its securities even when the required resolutions have been duly passed. However in case of unlisted companies, the company shall not withdraw the offer once the draft letter of offer has been filed with the Registrar of Companies. And in case of listed comapnies, buy back offer cannot be withdrawn once the draft letter of offer is filed with the SEBI or public announcement of the offer to buy-back is made.

(c) The buy-back is or less than 25% of total paid-up capital and free reserves of the company and that the buy-back of equity shares in any financial year shall not exceed 25% of the total paid-up equity capital in that financial year.

(d) The ratio of debt owed by equity is not twice the capital and its free reserves after such buy-back

(e) There has been no default in any of the following:

-in repayment of deposit or interest payable thereon

-redemption of debentures, or preference shares

-payment of dividend, if declared to all the shareholders within the stipulated time of 30 days from the date of declaration of dividend

-repayment of any term loan or interest payable thereon to any Financial Institution or Bank

(f) There has been no default in complying with the provisions of filing Annual return, Payment of Dividend, form and contents of Annual accounts

(g) All the shares or other specified securities for buy-back are fully paid-up

(h) The buy-back or other specified securities listed on any recognised stock exchange shall be in accordance with the regulations made by SEBI.

Issue of further shares after buy back:

Every buy-back shall be completed within 12 months from the date of passing the special resolution or Board resolution as the case maybe.

A company which has bought back any security cannot make any issue of the same kind of securities in any manner whether by way of public issue, rights issue, ESOP (though option can be granted) up to six months from the date of completion of buy-back.

Disclosures in Explanatory Statement to notice for buy back:

Where buy-back of securities is proposed after obtaining consent of shareholders, the notice of the general meeting at which special resolution is proposed to be passed shall be accompanied by an explanatory statement stating-

(i) a full and complete disclosure of all the material facts

(ii) the necessity for the buy-back

(iv) the class of security intended to be purchased under buy-back

(v) the amount to be invested in buy-back

(vi) Time- limit for completion of buy-back

In case of unlisted companies, an explanatory statement shall contain, amongst other things, disclosures specified under Schedule I to the Rules and in case of listed companies, disclosures specified under Schedule I to the Regulations. Further in case of listed companies, if buy back is through tender offer, additional disclosures as specified in Regulation 7 shall be made.

After resolution and before making buy-back, file declaration of Solvency:

After the passing of resolution but before making buy-back, company is required to file with the Registrar of Companies and in case of a listed company, also with the SEBI, a declaration of solvency in the prescribed form 4A [prescribed under the Companies (Central Government's) General Rules and Forms, 1956]. The declaration must be verified by an affidavit to the effect that the Board of Directors of the company have made a full enquiry into the affairs of the company as a result of which they have formed an opinion that it is capable of meeting its liabilities and will not be rendered insolvent within a period of one year of the date of declaration adopted by the board, and signed by at least two directors of the company one of whom shall be MD, if any.

File return after completion of buy back of securities:

After the completion of buy-back of securities, the company shall file with the Registrar of Companies and in case of a listed company, also with the SEBI a return in the prescribed form 4C [prescribed under the Companies (Central Government's) General Rules and Forms, 1956] containing such particulars relating to buy-back within 30 days of such completion.

Register of Securities Bought Back:

After completion of buy back, a company shall maintain a register of the securities/shares so bought and enter therein the following particulars:

(a) the consideration paid for the securities bought back

(b) the date of cancellation of securities

(c) the date of extinguishing and physically destroying of securities

(d) such other particulars as may be prescribed

Where a company buy-backs its own securities, it shall extinguish and physically destroy securities so bought back within seven days of the last date of completion of buy-back.

The company should extinguish and physically destroy the share certificates so bought-back in the presence of Company Secretary in Practice within seven days from the date of acceptance of the shares. [Rule 10 (1)].

Penalty on violation of law:
For violation of provisions of the Companies Act:

If a company makes default in complying with the provisions, the company or any officer of the company who is in default, shall be punishable with imprisonment for a term which may extend to two years, or with a fine which may extend to Rs. 50, 000, or with both. The offences are compoundable under section 621A of the Act.

For violation of provisions of the Listing Agreement:

For non compliance of clause 19 of listing agreement, person contravening the provision is liable u/s.23(1)(c) of SCRA to fine upto Rs.25,00,00,000/- or imprisonment upto 10 years or both; for non compliance of clause 40A of listing agreement, company is liable u/s. 23E, to fine upto Rs.25,00,00,000/- and for non compliance of clause 20 of listing agreement, person contravening the provision is liable u/s.23H of SCRA to fine upto Rs.1,00,00,000/-.

For violation of provisions of the SEBI Act and regulations made thereunder:

Liability may vary. For instance, for not filing with SEBI, any return or document or information within prescribed time or not maintianing records or failure to redess investors grievance, penalty (u/Ss.15A and 15C) could be Rs100,000/- per day of Rs.100,00,000/- whichever is less. For defaults under insider trading regulations or under the takeover regulations, penalty (u/Ss.15G and 15H) could be upto Rs.25,00,00,000/- or 3 times of profit made, whichever is higher. Further SEBI may issue directions thereby prohibiting access to securities market, disgorgement of ill gotten gains, prohibition from dealing in securities. And criminal prosecution under section 24 of SEBI Act.

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