Restrictions on purchase by company or giving of loans by it for purchase of its shares
Section 67 of the Companies Act, 2013 deals with restrictions on purchase by company or giving of loans by it for purchase of its shares. 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. The Act came into force on 01 Apr 2014.
(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 twentyfive lakh rupees.
Section 67, The Companies Act, 2013 (Act 18 of 2013).
Related judgements & precedents
These are some judgments that construed this section, and hold precedence value. They hold authority on how to read, interpret and use this section.
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S.k.narang, Co. vs Pasupati Fabrics
Court's Decision & Legal Precedent
Declining to set aside an arbitral award against an underwriter under section 34 of the Arbitration and Conciliation Act, the Court rejected the defence that the underwriting obligation was subject to a 'back to back' special financing arrangement under which the company would itself fund the subscription of its shares, such an arrangement being struck at by the statutory prohibition on a company purchasing its own shares or financing their purchase.
On this section: Illustrates the prohibition now in section 67 - that a company may not fund the acquisition of its own shares - being used to deny effect to a private financing arrangement behind an underwriting agreement, the case having been decided under section 77 of the Companies Act, 1956.
The holding above is the ratio decidendi as extracted from the judgment by eCourts India, reproduced unaltered — it is a rendering of the court's reasoning, not a substitute for its words. Read the order itself before relying on it.
Judgments citing this section
These may be obiter dicta or a precedent, for you to study. These are the judgments where this section is quoted.
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… Supervisory powers on Non-Banking Financial Companies in raising deposits, maintenance of accounts etc. is vested in Reserve Bank of India under Chapter 3B of the RBI Act, 1934. The SEBI has issued the impugned show-cause notice on the presumption that it has supervisory powers under Sections 55A, 117B and 67 of the Companies Act, 1956. The SEBI has no such powers. The impugned show-cause notice has been issued only to make a rowing enquiry to find out whether there has been any statutory violation of the Companies Act, 1956. Ext.P2 is therefore liable to be set aside. The Companies Act, 1956 has been repealed by the …
Made under this section, and citing it
2 instruments state that it was made under this provision — the power to make it comes from here, so a change to any of them changes what this section requires in practice. Newest first.
Another 4 instruments name this provision in its title or its text without being made under it.
- Notification –Exemption to Specified IFSC Public company –under section 462 of the Companies Act,2016Notification 2017
- Companies (Removal of Difficulties) Fourth Order, 2016Order 2016
- Exemptions to Nidhis under section 462 of CA 2013Notification 2015
- Exemptions to Private Companies under section 462 of CA 2013Notification 2015
Questions about Section 67
What have the courts held on Section 67 of the Companies Act?
S.k.narang, Co. vs Pasupati Fabrics (08 Feb 2006) is the leading judgment on this section among those set out below: Illustrates the prohibition now in section 67 - that a company may not fund the acquisition of its own shares - being used to deny effect to a private financing arrangement behind an underwriting agreement, the case having been decided under section 77 of the Companies Act, 1956.
How do I find court cases under Section 67 of the Companies Act?
In judgments and charge sheets this section is written several ways, and each form finds a different set of orders. These search the full text of every order eCourtsIndia holds, best matches first: Companies Act 67, section 67 Companies Act, section 67 of the Companies Act. People searching for it also type companies act 2013 section 67. Each opens the full list of orders on eCourtsIndia, where it can be narrowed by court, year and outcome. 1 reported judgment on this section is set out on this page, beginning with S.k.narang, Co. vs Pasupati Fabrics (08 Feb 2006).
What should I read with Section 67 of the Companies Act, and has it changed?
The rules and notifications made under it are where it actually bites, and there are 2: most recently Chapter IV - The Companies (Share Capital and Debentures) Rules, 2014 (2014), then The Companies (Share capital and Debentures) Amendment Rules, 2014 (2014).
When did Section 67 of the Companies Act come into force?
Section 67 of the Companies Act, cited as Companies Act 67, came into force on 01 Apr 2014, having been enacted on 29 Aug 2013. It is in force as at the date shown on this page.
Other sections of this Act
- 2. Definitions5089 words
- 143. Powers and duties of auditors and auditing standards1867 words
- 230. Power to compromise or make arrangements with creditors and members1432 words
- 232. Merger and amalgamation of companies1416 words
- 149. Company to have Board of Directors1403 words
- 217. Procedure, powers, etc., of inspectors1390 words
Source and method. Compiled from the enactments of Parliament and of the State legislatures as published on India Code, and republished together with commentary and other original matter under section 52(1)(q)(ii) of the Copyright Act, 1957. Structured, cross-referenced and maintained by eCourtsIndia. Text as in force on 15 Oct 2026. This page is not a substitute for legal advice.