14 September 2011
As per Section 77A(1)(iii), a Company may purchase its own shares or other specified securities out of the proceeds of any shares or other specified securities.
Query : Can a company buyback its equity shares out of the proceeds of issue of 8% optionally convertible debentures..?
The Buyback of securities u/s 77A, we can buy back of securities with issue of new shares or debentures can be possible but not the same class or same kind.
For Eg. Taking your case, equity shares can be buy back with the help of issuing new 8% debentures and not by issue of new equity shares.
15 September 2011
Thanks Vignesh.. But if you issue debentures for buying back its equity shares then the company is decreasing its capital and creating a new liability.
You are issuing convertible debentures for the purpose of buy back of securities. Thus, you may get the tax benefit for the interest you provide and as well as the convertible debentures shall be included to calculate net worth. cost of servicing the equity is higher when compared with debentures. so, there is no much higher additional liability for the company.
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