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1)want to expand company
2)creditors consideration
3)leverage from debt
4)Tax reason
5)Currency for an acquisition
6)Management return cash to share holder. E t c
To increase promoters holding
Increase earning per share
Rationalise the capital structure by writing off capital not represented by available assets.
Support share value
To prevent takeover bid
To pay surplus cash not required by business
- when its firms preparing for potential friendly merger
- for decreasing supply of its stocks to increasing its stock price
- or for stock employees ownership plane
but the firm is limited to purchase only 20% of its issued and must reissue maximum one year from purchase date , and the firm should maintain amount of retained earning equal purchase price without dividend .
Agreed with Mr. Vinod.
Agree with All of you
At one time it was completely prohibited for a company to buy its own shares. Now buy-backs are permitted subject to quite restrictive and detailed rules. The problem with companies buying their own shares is that, if completely unrestricted, there is a danger that creditors (and potential creditors) may be misled as to the size of the company's capital. This is part of the wider area of maintenance of capital. Under the Companies Act2006 a new procedure for the reduction of capital without a court order was introduced, which will sometimes be used rather than a buy back..
This is a very technical area. The rules are set out in some detail below, but a summary of them is:
Agreed with Divyesh and Sara on the various reasons explained.