The position of capital and reserves as on 31st March 2020 of King Ltd are given below: Equity Share Capital (60,000 @ ₹10 each, Fully Paid up) 6,00,000 Preference Share Capital (3000 @ ₹100 each, Fully Paid up) 3,00,000

CS Professional · Corporate Restructuring, Valuation and Insolvency · PYQS · June 2021
The position of capital and reserves as on 31st March 2020 of King Ltd are given below: Equity Share Capital (60,000 @ ₹10 each, Fully Paid up) 6,00,000 Preference Share Capital (3000 @ ₹100 each, Fully Paid up) 3,00,000 General Reserve 2,50,000 Security Premium Account 3,00,000 Statutory Reserves 4,00,000 The managing director of King Ltd wants to place proposal before board for buy-back some of its Equity shares. You as a company secretary, advise your managing director on the following issues: Maximum Quantum upto which King Ltd can buy-back its own shares with Board approval.

Answer & Explanation:

Maximum Quantum of Buy-Back with Board Approval: Board of directors can approve buy-back up to 10% of the total paid-up equity capital and free reserves of the company and such buy back has to be authorized by the board by means of a resolution passed at the meeting. Calculation: Paid-up Equity Capital = ₹6,00,000 Free Reserves = General Reserve + Security Premium Account + Statutory Reserves = ₹2,50,000 + ₹3,00,000 + ₹4,00,000 = ₹9,50,000 Total = Paid-up Equity Capital + Free Reserves = ₹6,00,000 + ₹9,50,000 = ₹15,50,000 Maximum Quantum (10% of Total) = 10% of ₹15,50,000 = ₹1,55,000 Number of shares = ₹1,55,000 / ₹10 (per share) = 15,500 shares Therefore, 15,500 shares can be bought back with Board approval.

Topics: Corporate Finance

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