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?

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.