CS Executive · Corporate Accounting and Financial Management · Related Aspects of Company Accounts
Which of the following is a legal source from which a company may fund a buy-back under the Companies Act, 2013?
The securities premium account is a permitted source. The Act allows buy-back from free reserves, securities premium, or proceeds of a fresh issue of shares or other specified securities, but forbids using proceeds of an earlier issue of the same kind of shares.
- AProceeds of an earlier issue of the same kind of shares
- BSecurities premium accountCorrect
- CCalls-in-arrear account
- DProceeds of forfeited shares
Explanation
Section 68(1) allows buy-back out of free reserves, the securities premium account, or proceeds of any issue of shares or other specified securities, but not out of proceeds of an earlier issue of the same kind. So the securities premium account is permitted and the first option is barred.
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