User talk:Caps shashank

Buy back of securities- sec 77A, 77AA, 77B.

1) MEANING: It means purchase of its own securities by the company. The securities to be bought back can be either equity shares/debentures/preference shares/bonds etc. the various legal provisions in this regard are; 1. It should be authorized by Articles. 2.Buy back can be made out of   A.Free reserves.   B.Security premium.   C.Fresh issue of other securities i.e. other than the securities to be bought back Eg: Buy back equity shares by issuing preference shares or debentures. 3.The maximum possible buy back of all securities is 25% of TOTAL PAID UP CAPITAL (equity+preference)+FREE RESERVE. However, the maximum buy back of equity shares in a financial year can not exceed 25% of paid up equity capital. 4.Post buy back scenario;       After the buy back, the ratio of debt to PAID UP CAPITAL+FREE RESERVE should not be more than 2. i.e.2:1. 5.When the buy back is less than 10%, board's resolution is sufficient. Hence special resolution of share holders is required for buy back of 10% or more. 6.When there is a buy back of shares(and not for debenture)out of free reserves, then amount equivalent to the nominal value of the shares to be bought back should be transferred to CRR. 7.Buy back can be made only when the shares are fully paid up. (Common condition for buyback, redemption of preference shares & Bonus shares) 8.Free reserves for the purpose of buyback means:(as per explanation to sec372A) a.Balance in General reserve/P&L accounts b.Securities premium account. 9.Immediately after buy back, the securities bought back should be destroyed. 10.If it is a listed Co., all provision of the SEBI to be fulfilled.

Headline: 1.The ratio prescribed in point no (4) above is not debt equity ratio as equity=net worth=owners funds=proprietary funds =shareholders funds=total paid up capital+all items of reserve and reserve and surplus(including capital reserve/P&L account debit balance-miscellaneous expenditure to the extent not written off. 2.Debt=secured loans+unsecured loans (short term or long term) 3.Buyback premium if any should be debited to free reserves & not to security premium since there is no specific law with regard to the same. Extract of B/S of Towering heights Ltd, an unlisted company. Particulars as on 31.3.2002                               Rs.in lakhs    Equity shares capital                                    300    (Rs.10 fully paid up)    Security premium                                          30    General reserve                                           100    Secured loans                                             400 Unsecured loans                                          220 Company seeks your advice to implement buyback its shares in May'02. Compute maximum possible Buyback amount in financial year 2002-03 & pass entries. Solution: Paid up capital (PUC)       300lakhs Free reserves               130lakhs Therefore buyback of all securities possible-25% of 430lakhs=107.5lakhs Maximum buyback of equity shares capital in a year possible:25% of 300lakhs =75lakhs After the buyback the ratio of debt:(PUC+FREE RESERVES) should not be more than 2:1. Let the equity capital to be bought back be x Debt/PUC+FREE RESERVES = 2/1 = 620/(300-X(share bought back))+9130-X(CRR created)) = 2/1-60L Extract of B/S (Post Buy Back) Liabilities                            Rs. Equity share capital(300-600)           240 General Reserve                         070 CRR                                     060 Secured Loan                            400 Unsecured Loan                         220 Here, 400+220=620;240+70=310(i.e 2:1)   Buy Back of->1.Debentures->By issuing preference (or) equity shares   2.Equity (or) Preference shares->a.By issuing other securities (say debentures)->b.Using free reserves (Creates CRR to the extent of the nominal value, face value. NOTE ON SECURITY PREMIUM: For the purpose of redemption of preference shares-Sec 80, security premium cannot be considered as a free reserve. But for paying premium on redemption of such shares, security premium can be used. For bonus issue, security premium shall be considered if & only if collected in cash. For the purpose of buyback of securities. Security premium (collected in cash or not) is considered as free reserve. Treatment of secuities premium->1.Redemption of preference share->a.For share capital->Cannot be used.->b.For premium->Can be used->2.bonus issue->can be used if nly if collected in cash.->3.Buyback of securities->Any security premium can be used Note:In the absence of specific information te equity share have presumed to have been bought back out of free reserves & hence there is a necessity to create CRR. It is presumed that loan do not include debenture.

Income Tax
Income Tax Tax means the amount paid by a person to government for availing various benefits provided by such Government direct or indirectly say infrastructure, health, education etc. One of the major source of revenue to the government is taxed.

What do you mean by income Tax? Income Tax is a tax(Sec 2(43)) on total income(Sec 2(45)) earned by assessee(Sec 2(7)) during previous year (Sec 3) chargeable to tax in assessment year(sec 2(9)).

COMPANY LAW
CHAPTER-1 NATURE OF COMPANY IMPORTANT QUESTIONS Q1.Define and state the meaning of company? Ans: Definition of company-sec.2(10):- Sec.3(1)(i)-company means a company formed and registered under this act or an existing company. Meaning of company: According to Lord Haney "A company is an incorporated association which is an artificial person created by law, having a separate entity, with a perpetual succession and a common seal". Q2.List the distinctive features of a company OR List the characteristic features of a company OR List the advantages of being a company OR List the effects of incorporation of a company? Ans:Following is the list:- 1.Separate legal entity/artificial legal person 2.Limited liability 3.Perpetual succession 4.Separate property 5.Transferability of shares 6.Common seal 7.Contractual rights & capacity to sue and be sued 8.Separate management (Board of Directors) 9.voluntary association for profits 10.Termination of existence by following the procedure of winding up. Q3.Explain the distinctive features of a company or characteristics features or consequence of incorporation or advantages of incorporation? Ans: Following are the features of company: SAME AS Q2 AND EXPLAIN. Q4.What are the disadvantages of incorporation? Ans:Disadvantage of incorporation: 1.Formalities involved are high 2.It is comparatively expensive 3.Requirement of minimum number of members as per section 12(Pvt-2;Public-7) 4.Requirement of minimum paid up capital (Private-1L;Public-5L)
 * Exiting company means a company formed and registered under any of the previous companies laws which were existing prior to The Companies Act,1956[Sec.3(1)(ii)].