Question
A company has a paid-up share capital of ₹80 lakh and free reserves of ₹120 lakh. It plans to buy back 25% of its paid-up equity shares. The face value per share is ₹10 and buyback price is ₹20. What is the maximum amount that can be used for buyback as per Companies Act, 2013?
Solution
As per Sec 68 of Companies Act: • Buyback ≤ 25% of paid-up capital + free reserves = 25% of ₹200L = ₹50L • Max buyback of paid-up equity capital only = 25% of ₹80L = ₹20L face value • At ₹20/share ⇒ 2L shares × ₹20 = ₹40L So, actual outflow: ₹40L But limit under act is 25% of total paid-up + reserves = ₹50L ⇒ Can use max ₹50L Answer: ₹50L
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