Question

Buy back of shares is meant for

• A. Public limited companies but not in India
• B. Public limited companies in India
• C. Only American companies
• D. None of these

Hint:

Check whether the buy back rule under Indian company law covers only public limited companies, or private ones too.

Answer 1

The Correct Option is D

Step 1: Understanding the Question:
We need to say which set of companies the buy back of shares rule actually applies to.

Step 2: Key Approach:
Buy back of shares means a company purchases back its own shares from existing shareholders, reducing the number of shares in the market. We check Indian company law to see exactly which companies this rule covers.

Step 3: Detailed Explanation:
India allowed companies to buy back their own shares after an amendment to the Companies Act in 1999, which added rules for this under Section 77A. This provision was not written only for public limited companies, both public and private limited companies registered in India are allowed to buy back their shares if they meet the conditions laid down in the law.
Option (1) is wrong because buy back of shares is very much a rule that applies in India, not somewhere else.
Option (2) is close but too narrow, it names only public limited companies, leaving out private limited companies that are equally allowed to buy back shares under Indian law.
Option (3) is wrong because buy back of shares is not limited to American companies, it is a rule used in many countries, including India.
Because no single option correctly and completely describes who buy back of shares is meant for, option (4) is the correct choice.

Step 4: Final Answer:
Buy back of shares, as covered under Indian company law, applies to more than what any single listed option states, so the answer is none of these.