Section 68(7) of the Companies Act, 2013 ("the Act") requires a company to extinguish and physically destroy the shares or securities bought back within seven days of the last date of completion of the buy-back. The requirement is mandatory, and it is designed to prevent the company from holding its own shares as treasury stock.
The Requirement
The company must extinguish the shares and physically destroy the share certificates. The destruction must be witnessed by the company secretary or the authorised officer, and the company must maintain a record of the destruction. The company cannot retain the shares, reissue them, or hold them in a trust.
The Compliance
The company must complete the buy-back within twelve months of the board or special resolution, and the seven-day period runs from the last date of completion. The company must file the return of buy-back in Form SH-11, and it must disclose the extinguishment and destruction.
The Consequences
A company that retains the bought-back shares is in breach of Section 68(7), and the company and its officers are liable to penalty. The shares are deemed to be extinguished, and the company cannot exercise any voting rights in respect of them.
The Delhi High Court Ruling
The Delhi High Court, in the Globe Capital decision, emphasised that Section 68(7) requires extinguishment within seven days and forbids the retention or reissue of the bought-back shares. The ruling confirms that the treasury stock concept is not recognised under the Companies Act.
Call to Action
Anuj Desai & Associates advises companies on the extinguishment and destruction of buy-back shares—from the seven-day timeline and the record-keeping to the SH-11 filing and the defence against a breach allegation. If you are completing a buy-back, we can help you comply.
📧 office@anujdesaiassociates.com
📞 9619456656
🌐 https://anujdesaiassociates.com
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