A company can buy its own shares when-
This question was previously asked in
Shift 29/05/2023 3:30 PM - 6:30 PM
A
The debt - Equity ratio is not more than 1:1 after the buy back.
B
The amount of buy back shares in any financial year not exceeding 20% of the paid-up capital and free reserves.
C
Partly paid up shares are considered buy back.
D
Article of Association must authorise and special resolution has been passed for the buy back of shares.
Correct Answer
Article of Association must authorise and special resolution has been passed for the buy back of shares.
Detailed Explanation
1)Buy back of shares must be authorized by its Articles of Association (AOA) of the company, if no provision in AOA then first alter the AOA.
2) If the shares to be bought back amount to a. Up to 10% of Paid-up capital + Free Reserves + Securities Premium – Pass Board Resolution. b. Up to 25% of Paid-up capital + Free Reserves + Securities Premium – Pass Special Resolution.
3) Buy-back should not be more than 25% of the total paid up capital and free reserves of the company.
4) Buy-back of equity shares in any financial year must not exceed 25% of its paid up equity capital.
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