Chapter IV - Share Capital and Debentures
Section 67
Section 67: purchase of own shares and financial assistance
A company cannot buy its own shares except through a reduction of capital under the Act, and a public company cannot give financial assistance for the purchase of, or subscription for, its own or its holding company’s shares.
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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 limited by shares or by guarantee and having a share capital shall have power to buy its own shares unless the consequent reduction of share capital is effected under the provisions of this Act.
(2) No public company shall give, whether directly or indirectly and whether by means of a loan, guarantee, the provision of security or otherwise, any financial assistance for the purpose of, or in connection with, a purchase or subscription made or to be made, by any person of or for any shares in the company or in its holding company.
(3) Nothing in sub-section (2) shall apply to— (a) the lending of money by a banking company in the ordinary course of its business; (b) the provision by a company of money in accordance with any scheme approved by company through special resolution and in accordance with such requirements as may be prescribed, for the purchase of, or subscription for, fully paid-up shares in the company or its holding company, if the purchase of, or the subscription for, the shares held by trustees for the benefit of the employees or such shares held by the employee of the company; (c) the giving of loans by a company to persons in the employment of the company other than its directors or key managerial personnel, for an amount not exceeding their salary or wages for a period of six months with a view to enabling them to purchase or subscribe for fully paid-up shares in the company or its holding company to be held by them by way of beneficial ownership: Provided that disclosures in respect of voting rights not exercised directly by the employees in respect of shares to which the scheme relates shall be made in the Board's report in such manner as may be prescribed.
(4) Nothing in this section shall affect the right of a company to redeem any preference shares issued by it under this Act or under any previous company law.
(5) If a company contravenes the provisions of this section, it shall be punishable with fine which shall not be less than one lakh rupees but which may extend to twenty-five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to three years and with fine which shall not be less than one lakh rupees but which may extend to twenty-five lakh rupees.
Introduction
Section 67 protects capital. Sub-section (1) bars purchase of own shares unless the reduction is effected under the Act. Sub-section (2) bars public companies from giving loans, guarantees, security or other financial assistance for share purchases or subscriptions, subject to three exceptions in sub-section (3).
Key takeaways
Own-share purchase
Allowed only where the consequent reduction of capital is effected under the Act.
Financial assistance
A public company cannot directly or indirectly assist a purchase of or subscription for its own or its holding company’s shares, except as sub-section (3) allows.
Strict penalties
Fine from one lakh to twenty-five lakh rupees for the company; imprisonment up to three years and the same fine range for officers in default.
Purchase of own shares
A company limited by shares, or by guarantee with a share capital, has no power to buy its own shares unless the consequent reduction of share capital is effected under the Act (section 67(1)). Section 68 buy-back and section 66 reduction are the statutory routes. Redemption of preference shares is preserved by sub-section (4).
- India Code — Companies Act, 2013 (consolidated), section 67
- eGazette — Companies Act, 2013 (18 of 2013) as enacted
- eGazette — Companies (Share Capital and Debentures) Rules, 2014, G.S.R. 265(E) (original notification)
- eGazette — G.S.R. 464(E), 5 June 2015 (private company exemptions)
- eGazette — G.S.R. 583(E), 13 June 2017 (amends G.S.R. 464(E))
Financial assistance by public companies
Section 67(2) prohibits a public company from giving, directly or indirectly, any financial assistance, whether by loan, guarantee, provision of security or otherwise, for or in connection with a purchase or subscription by any person of shares in the company or its holding company.
The three exceptions
Sub-section (3) permits: (a) lending by a banking company in the ordinary course of business; (b) provision of money under a scheme approved by special resolution and prescribed requirements, for purchase of or subscription for fully paid-up shares held by trustees for employees or by employees; rule 16 of the Companies (Share Capital and Debentures) Rules, 2014 sets those requirements; and (c) loans to employees other than directors or key managerial personnel, not exceeding six months’ salary or wages, to buy fully paid-up shares to be held as beneficial owners. Disclosures about voting rights not exercised directly by employees must be made in the Board’s report.
Private companies
G.S.R. 464(E) dated 5 June 2015 provides that section 67 does not apply to a private company (a) in whose share capital no other body corporate has invested money, (b) whose borrowings from banks, financial institutions or bodies corporate are less than twice its paid-up share capital or fifty crore rupees, whichever is lower, and (c) which is not in default in repaying such borrowings at the time of the transaction. Paragraph 2A, inserted by G.S.R. 583(E) dated 13 June 2017, limits the exceptions to private companies not in default in filing financial statements or annual returns. Check for any later amendment.
Amendments and commencement
Section 67 has not been amended since enactment. It came into force on 1 April 2014 under S.O. 902(E).
Practical preparation
Identify whether the company is public or private; map any loan, guarantee or security linked to a share purchase or subscription; test the three exceptions; for an employee scheme, pass the special resolution and follow rule 16; for a private company, test each G.S.R. 464(E) condition and filing status; record Board report disclosures.
Practical checklist
Do
- Trace indirect assistance, such as security given for a buyer’s borrowing.
- Keep evidence of each private-company exemption condition at the transaction date.
Avoid
- Do not lend to directors or key managerial personnel under the employee-loan exception.
- Do not exceed six months’ salary or wages in an employee loan for shares.
Illustrative example
Hypothetical: employee share loan
A public company wants to lend to staff so they can subscribe for fully paid shares.
Eligibility
Exclude directors and key managerial personnel.
Limit
Cap each loan at six months’ salary or wages.
Disclose
Make the voting-rights disclosures in the Board’s report.
Outcome
- The loans can fit section 67(3)(c) if each element is met.
Glossary
- Financial assistance
- Any loan, guarantee, security or other support given for a purchase of or subscription for shares.
- Key managerial personnel
- The officers defined in section 2(51), such as the chief executive officer, company secretary and chief financial officer.
Frequently asked questions
Can a public company guarantee a loan taken to buy its shares?
Not unless one of the exceptions in section 67(3) applies; a guarantee is expressly a form of prohibited financial assistance.
Does section 67 apply to private companies?
Section 67(1) applies to companies generally, but G.S.R. 464(E) disapplies section 67 for private companies meeting its three conditions, subject to its filing-default condition.
Need help applying this provision to your situation?
Contact BizeneedLast updated 11 October 2026