# Prohibition for Buy-back of Shares (Section 70)
## Overview
Section 70 of the Companies Act, 2013 lays down circumstances where a company is prohibited from buying back its own shares or other specified securities, either directly or indirectly.
## Absolute Prohibitions (Section 70(1))
No company shall directly or indirectly purchase its own shares or specified securities in the following situations:
### A. Through Restricted Channels
1. Through any subsidiary company (including its own subsidiary companies); or
2. Through any investment company or group of investment companies
### B. Where Default Exists
If the company has defaulted in any of the following:
| # | Nature of Default |
|---|---|
| i | Repayment of deposits or interest thereon |
| ii | Redemption of debentures |
| iii | Redemption of preference shares |
| iv | Payment of dividend to any shareholder |
| v | Repayment of any term loan or interest thereon to financial institutions or banking company |
Important Relief: Where the default has been remedied and a period of 3 years has lapsed after such default ceased to subsist, the buy-back is not prohibited.
## Prohibitions Linked to Non-Compliance (Section 70(2))
A company is further prohibited from buy-back if it has not complied with the provisions of:
| Section | Subject Matter |
|---|---|
| Section 92 | Annual Return |
| Section 123 | Declaration and Payment of Dividend |
| Section 127 | Punishment for failure to distribute dividends |
| Section 129 | Financial Statement |
## Key Definition
Specified Securities [Explanation I to Section 68] includes:
- Employees' Stock Option (ESOP)
- Other securities as may be notified by the Central Government from time to time
## Quick Recall Chart
```
Buy-back PROHIBITED if:
Route problem → via subsidiary OR investment company
Default problem → deposits, debentures, pref shares, dividend, term loan
(unless remedied + 3 years passed)
Compliance gap → Sec 92 / 123 / 127 / 129 not complied
```