CA Inter P2 · Chapter 4 · Question 10 of 11
Crest Ltd has paid-up equity share capital of ₹40 crore, a general reserve (free reserve) of ₹25 crore and a securities premium account of ₹15 crore. What is the maximum buy-back the Board can approve under section 68 without a special resolution of members?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) ₹8 crore
Explanation
Under the proviso to section 68(2)(b), the Board may authorise a buy-back of up to ten per cent of the total paid-up equity capital and free reserves. Under the Explanation to section 68, free reserves include the securities premium account. Base = 40 + 25 + 15 = ₹80 crore, so the Board limit = 10% x 80 = ₹8 crore. A larger buy-back, up to 25%, needs a special resolution.
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