Skip to content

CA Intermediate · Advanced Accounting · Buyback of Securities

Kaveri Industries Ltd. has paid-up equity share capital of Rs 40,00,000 and free reserves of Rs 60,00,000. It has no preference capital and no secured or unsecured loans. Under a board-approved buyback (no shareholder special resolution), what is the maximum amount it can spend, applying only the 10% limit of paid-up capital and free reserves?

The maximum is Rs 10,00,000. A board-authorised buyback cannot exceed 10% of the aggregate of paid-up capital and free reserves, here Rs 40 lakh plus Rs 60 lakh, which is Rs 1 crore. The 25% limit applies only when a special resolution is passed.

  1. ARs 4,00,000
  2. BRs 10,00,000Correct
  3. CRs 6,00,000
  4. DRs 25,00,000

Explanation

Buyback authorised by board resolution is limited to 10% of the total of paid-up capital and free reserves. Total = Rs 40,00,000 + Rs 60,00,000 = Rs 1,00,00,000; 10% = Rs 10,00,000. Rs 4,00,000 wrongly takes 10% of capital only. Rs 25,00,000 is the 25% limit applicable to a special resolution.

Did you get it right without looking?

One question tells you little. A timed set on Buyback of Securities shows your real accuracy, how long you take and where you lose marks.

Practise Buyback of SecuritiesFree diagnostic mock

More Buyback of Securities questions