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 shareholders' approval.

Answer & Explanation:

Maximum Quantum of Buy-Back with shareholder's Approval: Shareholders by a special resolution can approve buy-back up to 25% of the total paid-up capital and free reserves of the company. In respect of any financial year, the shareholders can approve by special resolution upto 25% of total equity capital in that year. 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 (25% of Total) = 25% of ₹15,50,000 = ₹3,87,500 Number of shares = ₹3,87,500 / ₹10 (per share) = 38,750 shares Therefore, 38,750 shares can be bought back with shareholder approval.

Topics: Corporate Finance

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