Chapter IV - Share Capital and Debentures
Section 70
Section 70: circumstances in which buy-back is barred
A company cannot buy back its own shares or other specified securities through subsidiaries or investment companies. It also cannot do so while specified defaults continue, or if it has not complied with sections 92, 123, 127 and 129.
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This article is for general information. Refer to the Companies Act, 2013 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) No company shall directly or indirectly purchase its own shares or other specified securities— (a) through any subsidiary company including its own subsidiary companies; (b) through any investment company or group of investment companies; or (c) if a default, is made by the company, in the repayment of deposits accepted either before or after the commencement of this Act, interest payment thereon, redemption of debentures or preference shares or payment of dividend to any shareholder, or repayment of any term loan or interest payable thereon to any financial institution or banking company:
Provided that the buy-back is not prohibited, if the default is remedied and a period of three years has lapsed after such default ceased to subsist.
(2) No company shall, directly or indirectly, purchase its own shares or other specified securities in case such company has not complied with the provisions of sections 92, 123, 127 and section 129.
Introduction
Section 70 adds conditions to the buy-back power in section 68. A buy-back barred by a past default becomes possible only after the default is remedied and three years have lapsed since it ceased to subsist.
Sub-section (1) came into force on 12 September 2013 under S.O. 2754(E), and sub-section (2) on 1 April 2014 under S.O. 902(E). The consolidated text shows no amendment.
Key takeaways
No indirect route
No buy-back through any subsidiary company or through any investment company or group of investment companies.
Default bar
Default in deposits, interest, debenture or preference redemption, dividend, or term-loan repayment or interest to a financial institution or banking company bars buy-back.
Compliance bar
Non-compliance with sections 92 (annual return), 123 (declaration of dividend), 127 (failure to distribute dividends) and 129 (financial statement) bars buy-back.
Check the structure
A company may not purchase its own shares or other specified securities, directly or indirectly, through any subsidiary company, including its own subsidiaries, or through any investment company or group of investment companies.
Check for defaults
Clause (c) bars buy-back where the company has defaulted in any of the following: repaying deposits accepted before or after the commencement of the Act, or interest on them; redeeming debentures or preference shares; paying dividend to any shareholder; or repaying a term loan, or interest on it, to any financial institution or banking company. Under the proviso, buy-back is not prohibited if the default is remedied and three years have lapsed after the default ceased to subsist.
Check statutory compliance
Sub-section (2) bars buy-back if the company has not complied with sections 92, 123, 127 and 129. In practice, review annual-return filings, dividend declaration and distribution, and financial-statement compliance before the Board proposes a buy-back.
Practical preparation
Confirm the buy-back is by the company itself. Review the default history for deposits, debentures, preference shares, dividends and term loans. Compute the three-year cooling period from when any default ceased. Verify compliance with sections 92, 123, 127 and 129.
Practical checklist
Do
- Prepare a default-history certificate covering every head in clause (c).
- Document compliance with sections 92, 123, 127 and 129 in the buy-back file.
Avoid
- Do not route a buy-back through a subsidiary or investment company.
- Do not start the three-year period before the default is remedied.
Illustrative example
Hypothetical: past debenture default
A company defaulted in debenture redemption and cured the default two years ago.
Identify
This is a clause (c) default.
Cooling period
Three years must lapse after the default ceased to subsist.
Decide
Defer the buy-back for another year.
Outcome
- The company proposes the buy-back only after the three-year period.
Glossary
- Buy-back
- Purchase by a company of its own shares or other specified securities, permitted by section 68 subject to section 70.
Frequently asked questions
Can a company buy back after curing a default?
Only after the default is remedied and three years have lapsed after it ceased to subsist.
Which compliance failures bar buy-back?
Non-compliance with sections 92, 123, 127 and 129.
Need help applying this provision to your situation?
Contact BizeneedLast updated 11 October 2026