Amended and updated notes on section 67 of Companies Act 2013. Detail discussion on provisions and rules related to restrictions on purchase by company or giving of loans by it for purchase of its shares.
Chapter IV (Sections 43–72) of the Companies Act, 2013 (CA 2013) deals with the provisions related to share capital and debentures. Section 67 of CA 2013 provides for restrictions on purchase by company or giving of loans by it for purchase of its shares.
Recently, we have discussed in detail section 66 (Reduction of share capital) of CA 2013. Today, we learn the provisions of section 67 of Companies Act 2013 read with the Companies (Share Capital and Debentures) Rules, 2014.
Section 67 of the Companies Act, 2013 has been notified by the Ministry of Corporate Affairs (MCA) vide Notification No. S.O. 902(E) issued dated 27.03.2014. This notification was come into force from 1st April, 2014 i.e. the commencement date of section 67 is 1-4-2014.
| Name of Act | The Companies Act 2013 |
|---|---|
| Enacted by | Parliament of India |
| Administered by | Ministry of Corporate Affairs (MCA) |
| Number of Chapters | 29 |
| Number of Sections | 484 (470-43+57) |
| Number of Schedules | 7 |
| You are reading: | |
| Chapter No. | IV |
| Chapter Name | Share Capital and Debentures |
| Section No. | 67 |
| Section Name | Restrictions on purchase by company or giving of loans by it for purchase of its shares |
| Monthly Updated Edition | Company Law PDF |
Section 67 of Companies Act 2013: Restrictions on purchase by company or giving of loans by it for purchase of its shares
Section 67 shall come into force on 1st April, 2014 vide Notification No. S.O. 902(E) issued dated 27.03.2014.
(1) No company limited by shares or by guarantee and having a share capital shall have power to buy its own shares unless the consequent reduction of share capital is effected under the provisions of this Act.
(2) No public company shall give, whether directly or indirectly and whether by means of a loan, guarantee, the provision of security or otherwise, any financial assistance for the purpose of, or in connection with, a purchase or subscription made or to be made, by any person of or for any shares in the company or in its holding company.
(3) Nothing in sub-section (2) shall apply to—
- (a) the lending of money by a banking company in the ordinary course of its business;
- (b) the provision by a company of money in accordance with any scheme approved by company through special resolution and in accordance with such requirements as may be prescribed, for the purchase of, or subscription for, fully paid-up shares in the company or its holding company, if the purchase of, or the subscription for, the shares held by trustees for the benefit of the employees or such shares held by the employee of the company;
- (c) the giving of loans by a company to persons in the employment of the company other than its directors or key managerial personnel, for an amount not exceeding their salary or wages for a period of six months with a view to enabling them to purchase or subscribe for fully paid-up shares in the company or its holding company to be held by them by way of beneficial ownership:
Provided that disclosures in respect of voting rights not exercised directly by the employees in respect of shares to which the scheme relates shall be made in the Board’s report in such manner as may be prescribed.
(4) Nothing in this section shall affect the right of a company to redeem any preference shares issued by it under this Act or under any previous company law.
(5) If a company contravenes the provisions of this section, it shall be punishable with fine which shall not be less than one lakh rupees but which may extend to twenty-five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to three years and with fine which shall not be less than one lakh rupees but which may extend to twenty-five lakh rupees.
Exception/ Modification/ Adaptation:
1) Section 67 shall not apply to private companies –
(a) in whose share capital no other body corporate has invested any money;
(b) if the borrowings of such a company from banks or financial institutions or any body corporate is less than twice its paid up share capital or fifty crore rupees, whichever is lower; and
(c) such a company is not in default in repayment of such borrowings subsisting at the time of making transactions under this section. –Notification No. G.S.R. 464(E) dated 5th June, 2015.
2) In case of Nidhis, sub-section (1) of Section 67 shall not apply, when shares are purchased by the company from a member on his ceasing to be a depositor or borrower and it shall not be considered as reduction of capital under section 66 of the Companies Act, 2013. –Notification No. G.S.R. 465(E) dated 5th June, 2015.
3) Section 67 shall not apply to a Specified IFSC public company-
(a) in whose share capital no other body corporate has invested any money;
(b) if the borrowings of such company from banks or financial institutions or any body corporate is less than twice of its paid up share capital or fifty crore rupees, whichever is lower; and
(c) such a company is not in default in repayment of such borrowings subsisting at the time of making transactions under this section. –Notification No. G.S.R. 08(E) dated 4th January, 2017.