Regulation 118 — Eligibility Requirements for the Purchase. -Subject to section 88 of the Act, a public

unlisted or a private company, fulfills the following conditions: -

(a) it has distributable profits or reserves for the purpose of purchase of its own shares:
Provided that a startup company may also use other resources for purchase of its own
shares subject to the condition that it remains solvent;
Provided further that if the purchasing company is engaged in any business activity
which is subject to license or approval by the Commission, it has obtained permission
from the relevant department in respect of the purchase;
(b) it has obtained approval of its members for purchase through special resolution;
(c) the purchase is recommended by the board through resolution and the board of
directors has undertaken through a resolution that the funds specified for the purchase are
available with the purchasing company and after the purchase, the purchasing company is
capable of meeting all its financial obligations on time during the period up to the en d of
the immediately succeeding twelve months;
(d) the secured creditors of the company have no objection to the proposed purchase of
shares by the purchasing company;
(e) the board of directors of a purchasing company shall not propose or recommend a

purchase in any of the following circumstances namely: -
(i) its winding up proceedings have commenced;
(ii) a scheme of arrangement, compromise, reconstruction, merger or demerger is
approved by the board of directors unless the purchase is a part of such
arrangement, compromise, reconstruction, merger or demerger; and
(iii) it is not compliant with the provisions of the Act, rules and regulations framed
thereunder.