Enkebee Ltd. wants to purchase its own 1,00,000 equity shares @ ₹10 each out of the following: (a) Unsecured loan ₹5 lakh (b) Balance of depreciation reserve for ₹3 lakh (c) Securities premium account ₹4 lakh. Examine th
CS Executive · Company Law · PYQS · June 2018
Enkebee Ltd. wants to purchase its own 1,00,000 equity shares @ ₹10 each out of the following: (a) Unsecured loan ₹5 lakh (b) Balance of depreciation reserve for ₹3 lakh (c) Securities premium account ₹4 lakh. Examine the legality of the above transactions for the buy-back of securities of the company under the provisions of the Companies Act, 2013.
Answer & Explanation:
According to Section 68(1) of the Companies Act, 2013, a company may purchase its own shares or other specified securities out of the following: its free reserves; or the securities premium account; or the proceeds of any shares or other specified securities. Hence, Enkebee Ltd. can purchase its own shares only out of the Securities Premium account and not out of unsecured loan or balance of depreciation reserve (not being free reserve).
Topics: Buy-back of Securities
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