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CA Final · Integrated Business Solutions (Multidisciplinary Case Study with Strategic Management) · Corporate and Economic Laws

Case: Sundaram Pharma Ltd, a listed company, proposes to buy back its own equity shares out of free reserves. Its paid-up capital is Rs 40 crore and free reserves are Rs 60 crore, so paid-up capital plus free reserves are Rs 100 crore. The board wants a buy-back via a board resolution only. Under the Companies Act, 2013, up to what amount of buy-back can be authorised by the board alone without a shareholders' special resolution?

The board alone can authorise a buy-back up to 10% of the aggregate paid-up equity capital and free reserves, which is Rs 10 crore here. Anything above that, up to the 25% overall limit of Rs 25 crore, requires a special resolution of shareholders.

  1. ARs 10 crore (10% of paid-up capital and free reserves)Correct
  2. BRs 25 crore
  3. CRs 4 crore
  4. DRs 50 crore

Explanation

A board resolution suffices if the buy-back is up to 10% of the total paid-up equity capital and free reserves: 10% of Rs 100 crore equals Rs 10 crore. Beyond this, up to 25% (Rs 25 crore) needs a special resolution. Rs 25 crore is therefore the overall cap, not the board's limit. Rs 4 crore wrongly takes 10% of paid-up capital alone.

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