Question

Buyback of shares should not exceed _____ of paid up capital and free reserve of the company.

• A. 50%
• B. 10%
• C. 5%
• D. 25%

Answer 1

Answer: (D)

25%

Section 77 A of the Companies Act allows companies to buy back its own shares either from existing equity shareholders or from open market or odd lots of shareholders.

There are certain guidelines which companies required to follow for buy back:

1) The buy back should be authorized by Articles.

2) Buy back should be passed by a special resolution in the general meeting.

3) Buy back of shares should not exceed 25% of paid up capital & free reserve of the company.

4) Only fully paid up shares can be buy back.

5) Buy back should be completed within 12 months from the date of resolution.