Buy back of shares by promoters as against buy back by a co
V.Satya venkatarao
(Querist) 12 June 2010
This query is : Resolved
I would like to know whether a buy back of shares by the promoters of a company is legally enforceable. To be precise for instance if the promoters of a company enetr into a contract with another shareholder( Investor) agreeing to buy back the shares at a certain point of time with a certain rate is it valid?
Similarly can the promoters of a company assure a particluar rate of dividend to its shareholders? Will not such a contract run contrary to the provisions of the company law and will it not be a derogation of the shareholders rights
Advocate. Arunagiri
(Expert) 06 October 2010
The buy back scheme is legaly valid.
Assuring the dividend can not be done. The contract for promise of dividend is void. Because the dividend comes from the profit generated from the business. The dividend has to be approved by the AGM.
