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    Question

    MTG Ltd wants to buyback its shares. What is the maximum

    limit up to which it is allowed to buy-back its shares in a year?
    A 10% Correct Answer Incorrect Answer
    B 15% Correct Answer Incorrect Answer
    C 25% Correct Answer Incorrect Answer
    D 30% Correct Answer Incorrect Answer
    E As approved by the Board of company Correct Answer Incorrect Answer

    Solution

    Under Section 68(2)(c) of the Companies Act, 2013 , a company is permitted to buy back a maximum of  25% or less  of the aggregate of its paid-up capital and free reserves. The 25% limit is part of a broader set of conditions that must be fulfilled for a valid buyback under the Companies Act, 2013: 

    • The buyback must be authorized by the company's Articles of Association.
    • All shares or securities for the buyback must be fully paid-up.
    • The debt-to-equity ratio after the buyback must not exceed 2:1.
    • The buyback process must be completed within one year from the date of passing the relevant Board or Special Resolution.

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