CS Executive · Corporate Accounting and Financial Management · Related Aspects of Company Accounts
Sagar Textiles Ltd has equity share capital of Rs 60,00,000 (fully paid) and free reserves of Rs 40,00,000. The Board alone, by a Board resolution, wishes to buy back shares. What is the maximum buy-back amount that can be authorised by the Board resolution without a special resolution?
The maximum is Rs 10,00,000. A Board resolution suffices only where the buy-back is ten per cent or less of paid-up equity capital plus free reserves, which is 10% of Rs 1,00,00,000. Larger buy-backs up to the 25% limit need a special resolution.
- ARs 25,00,000
- BRs 10,00,000Correct
- CRs 6,00,000
- DRs 15,00,000
Explanation
The Board can authorise a buy-back of ten per cent or less of total paid-up equity capital and free reserves. Total = 60,00,000 + 40,00,000 = 1,00,00,000; 10% = Rs 10,00,000. Rs 25,00,000 is the 25% ceiling needing a special resolution.
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