“Measuring the shareholders' value” is the objective of Good Corporate Governance. Comment on the statement, how buy back of shares achieves it.

It is right to say that good corporate governance calls for measuring the shareholders' value. When a company has surplus funds for which it does not have good avenues for deployment, assuring an average return on capital employed and earnings per share (EPS), the company's financial structure requires balancing. The Board of directors of the Company has to make a thorough study into the financial structure of the company, the precise reasons for its restructuring and the mode of restructuring which would be suitable to the requirements of the company in the given circumstances. One of the methods of financial restructuring open to a company is buy-back of its own securities. Buy-back results in the return of the shareholders money to the shareholders and a reduction of the floating stock of the company's securities in the market while at the same time creating value for the remaining equity. In a reconstruction exercise, the reasons for embarking upon a buy-back are varied and could include: Facilitating reduction of share capital without recourse to the lengthy and time consuming process of passing special resolution subject to confirmation by the Tribunal as required under section 66 of the Companies Act, 2013; Creation of liquidity in a company's share capital and providing an exit route, where shares are unlisted, or to encourage investment in an unlisted company by agreeing to purchase shares subscribed for at a later date; Proper and judicious deployment of the company's finances by investing the same in the purchase of its own securities; Maintaining shareholders' value in a situation of poor state of secondary market by a return of surplus cash to the shareholders; and countering hostile take-over.