CS Executive · Capital Market and Securities Laws · Buy-Back of Securities
Kaveri Foods Ltd proposes a buy-back and wants to fund it. Which of the following is a permitted source of funds for the buy-back under the Companies Act, 2013?
The securities premium account is a permitted source. A company may buy back out of free reserves, the securities premium account or proceeds of an issue of shares or other specified securities, but not out of proceeds of an earlier issue of the same kind of shares.
- AProceeds of an earlier issue of the same kind of shares
- BThe securities premium accountCorrect
- CBorrowings made specifically from its subsidiary company
- DUnpaid calls on partly paid shares
Explanation
Buy-back may be made out of free reserves, the securities premium account or proceeds of a fresh issue of shares or other specified securities. Proceeds of an earlier issue of the same kind of shares are specifically barred, so that option is wrong.
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