Monika Ltd. wants to purchase its own 5,00,000 equity shares @ ₹ 10/- each out of the following: lakh (a) Unsecured Loans 25 (b) Balance of Free Reserves 15 (c) Securities Premium Account 10 Examine the legality of the a

According to Section 68(1) of the Companies Act, 2013 a company may purchase its own shares or other specified securities (known as 'buy-back') out of: its free reserves; or the securities premium account; or the proceeds of the issue of any shares or other specified securities. However, no buy-back of any kind of shares or other specified securities shall be made out of the proceeds of an earlier issue of the same kind of shares or same kind of other specified securities. Thus, in given case Monika Ltd. can purchase its own 5,00,000 equity shares @ ₹ 10 each out of free reserves and from the securities premium account in accordance with the provisions of the Companies Act, 2013. But it cannot do buy-back from the amount of Unsecured Loan as it will be contravention of the provisions of Section 68 of the Companies Act, 2013.