Buyback of shares rules: statutory funding, procedural safeguards and tax characterisation determine regulatory consequences.
Buyback of shares is governed by a specific statutory regime prescribing permitted funding sources, quantitative limits, fully paid share requirement, corporate authorisation and procedural safeguards including solvency declarations and shareholder approval; strict compliance is required to avoid penalties and risks such as misleading announcements and insider trading. Section 68 is the principal provision, though court sanctioned schemes remain an alternative where statutory ceilings bind, with the choice of route affecting fiscal treatment. Tax provisions such as Section 115QA target distributed income on buybacks, but courts have held that compliant buybacks are not ipso facto colourable devices merely because of tax effects. (AI Summary)