Question

Hi Can you please answer this following question with Harvard referencing and no plagiarism and also reference list. Thanks you very much for answering in the best way.

Joe is a company director in a proprietary company. He is proposing to put a resolution to his company that it buy out the smaller holdings. Joe reasons that there are a number of quite large shareholdings and many of the smaller members have little interest in the company. Joe does not want to force any member to sell their shares but would like to 'clean up the register' by buying out the smaller holdings.

Required:

Advise Joe on the legal implications of his plan. ( Corporations law)

Answer 1

The following legal checkpoints are to be considered by Joe while buying out shares fom existing shareholders:

1. Firstly all Articles of Association should provide authorization to the company to buyback its shares.

2. Buyback limit: Buyback can be done only up to 25 percent or less than its paid up share capital and free reseves.

3. Buy back can be done from its existing sharehokders or employess who are shareholders and open market

4. Buy back can be dome either through free reserves, secirity premium or either through proceeds of fresh issue of shares.

5. After buyback debt equity ration ahould not exceed 2:1 ratio.

6. While buy back all the shares should be fully paid out to shareholders.

7. Minimum time gap between two buyback ahould be one year.

8. Company should not issue fresh shares within 6 months of buyback.

9. Once the proposal to buyback of shares is announced to shareholders, buyback proposal should not be withdrawn.

1. No fund borrowed from banks or financial institutions should be utilized for buyback