Before undertaking buyback, the company must file a Declaration of Solvency, ensuring shareholders and creditors that the company can meet its liabilities.
## 1. Filing Requirement
Form: SH-9
Filed with: Registrar of Companies (ROC). Additionally, with SEBI if the company is listed.
Timing:BEFORE undertaking the buyback.
## 2. Signing Requirement
The DOS must be signed by at least 2 Directors, of whom one must be Managing Director (MD) — if there is one (i.e., MD's signature is compulsory if the company has an MD).
## 3. Verification
The declaration must be verified by an affidavit stating that:
1. The Board of Directors has made a full enquiry into the affairs of the company, AND
2. They are of the opinion that the company is capable of meeting its liabilities, AND
3. The company will NOT be rendered insolvent within a period of 1 year from the date of declaration.
## Visual Summary
```
DOS (Form SH-9)
│
├── Signed by 2 Directors (1 must be MD - compulsory if exists)
├── Verified by Affidavit
│ └── Confirms: full enquiry done
│ company can meet liabilities
│ no insolvency within 1 year
└── Filed with ROC (+ SEBI if listed)
```
## Why Important?
The DOS protects creditors. By signing and filing it, directors take personal responsibility for the solvency assessment. A false DOS attracts penal consequences.
Worked example
### Example 1
Example 1 — Form and authority: ABC Ltd (unlisted) is undertaking a buyback worth ₹10 crores. Before commencement, it must file Form SH-9 (DOS) signed by 2 directors (including the MD) with the ROC, verified by affidavit.
### Example 2
Example 2 — Listed company: XYZ Ltd (listed) is undertaking buyback. It must file DOS in Form SH-9 with BOTH ROC and SEBI before commencement.
### Example 3
Example 3 — Affidavit content: Directors of PQR Ltd must affirm in the affidavit: (a) they have made a full inquiry, (b) they believe the company can pay its debts, and (c) the company will not become insolvent within 1 year. Without all three, the DOS is defective.
⚠️ Common exam mistakes
Filing DOS after buyback — it must be filed BEFORE undertaking buyback.
Filing DOS with only one director's signature — minimum 2 required, one being MD if MD exists.
Forgetting to file with SEBI in case of listed companies (filing only with ROC is insufficient).
Confusing the 1-year insolvency declaration with the 1-year time limit for completion of buyback — these are separate concepts.
Bare-Act text Section 68(6) · Companies Act, 2013 · click to expand
Where a company proposes to buy-back its own shares or other specified securities under this section in pursuance of a special resolution under clause (b) of sub-section (2) or a resolution under item (ii) of the proviso thereto, it shall, before such buy-back, file with the Registrar and the Securities and Exchange Board, a declaration of solvency signed by at least two directors of the company, one of whom shall be the managing director, if any, in such form as may be prescribed and verified by an affidavit to the effect that the Board of Directors of the company has made a full inquiry into the affairs of the company as a result of which they have formed an opinion that it is capable of meeting its liabilities and will not be rendered insolvent within a period of one year from the date of declaration adopted by the Board.