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Buy Back of Shares

Deepanshu Aggarwal (NA) (115 Points)

31 July 2010

Sir,

Please answer to query

Equity capital - 1,00,000 equity shares of Rs. 10/- each = Rs.10,00,000/-

Free Reserves - Rs. 10,00,000/-

The Company authorises buy back upto Rs. 5,00,000/- ( 25%of total paidup capital and free reserves)

as buy back of equity shares can't exceed 25% of total paid up equity capital in any financial year

I would lile to ask whether the above percentage is calculated on number of shares or on the amount of buy back

My question is

whether the company can buy back 10,000 shares at the price of Rs. 25/- = Rs. 2,50,000 ( 25% of total equity paid up capital )

the company can buy back 25,000 shares at the price of Rs. 20/- = Rs. 5,00,000/- (exceed 25% of total equity paid up capital but within authorisation limit)

Please clarify

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2 Replies

vivek (CS) (751 Points)
Replied 31 July 2010

Upto my understanding:-

77(C) the buy-back is or less than twenty-five per cent of the total paid-up capital and free reserves of the company: - [This is regarding total fund it can apply for Buy Back in any F.Y.] {In your case you can use maximum Rs. 5,00,000/- in a F.Y.}

Provided that the buy-back of equity shares in any financial year shall not exceed twenty-five per cent of its total paid-up equity capital in that financial year;- [This is clearly stating maximum ceiling on buy back of equity shares in a F.Y.] {In your case you can buy back maximum 25,000 equity share in a F.Y.}

But, wait for the expert's comment.

Regards,

CS Vijay Daxini (At Practice) (732 Points)
Replied 05 August 2010

THIS REPLY IS NOT FRM ME BT MY FRIEND JAGRUTI (CS) U CAN ALSO VISIT HER PROFILESubject : hi Message : 25 % is on Amount of buy Back of equity shares & not on no. of equity shares.
As per Section 77A (2)(c), in case of buy back of equity shares it should not exceed 25% of total paid up EQUITY capital. Which in ur case is 250000 (25 % of 1000000 equity capital) Hence first option of 10000 shares @ 25 each is correct. From : Jagruti (CS)