CA Inter P1 · Chapter 10 · Question 2 of 10
Case: Garima Ltd has paid-up equity share capital of ₹50,00,000 (shares of ₹10 each), securities premium of ₹10,00,000 and general reserve of ₹30,00,000. It proposes a buyback at ₹30 per share with a special resolution. Considering only the shares outstanding test and the resources test under section 68, the maximum number of shares it can buy back is:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) 75,000
Explanation
Shares outstanding test: 25% of 5,00,000 shares = 1,25,000 shares. Resources test: 25% of (paid-up capital + free reserves including securities premium) = 25% x 90,00,000 = 22,50,000; at ₹30 per share = 75,000 shares. The lower of the two, 75,000 shares, is the maximum.
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