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CS Executive · Capital Market and Securities Laws · Buy-Back of Securities

Chitra Textiles Ltd wants to buy back its own shares. Which of the following is a permitted source of funds for the buy-back under Section 68(1) of the Companies Act, 2013?

The securities premium account is a permitted source of buy-back funds under Section 68(1). The other permitted sources are free reserves and proceeds of a fresh issue of shares or other specified securities, but not proceeds of an earlier issue of the same kind.

  1. AIts securities premium accountCorrect
  2. BProceeds of an earlier issue of the same kind of shares
  3. CUnpaid calls on partly paid shares
  4. DCapital redemption reserve created for redeeming debentures only

Explanation

Section 68(1) permits buy-back out of free reserves, the securities premium account, or the proceeds of the issue of any shares or other specified securities. Explanation II also treats securities premium as part of free reserves. Proceeds of an earlier issue of the same kind of shares are specifically barred by the proviso.

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