Buy back of shares -extremely confused

Dear Mukesh,

First talking about Point 1(b)........

Security Premium is the amount which company receives from shareholders over and above face value of shares at the time of issue of share. At the time of buy back of share any excess amount paid over the face value should be first reduced from Security Premium afterward any unutilised amount over and above should be reduced from Free Reserves.

In Regards to Point 2.......

Capital Redemption Reserve is created to ensure the remaining share holders that there liquidity position has not been disturbed due to such buy back. Capital Redemption Reserve are not eligible for dividend distribution they can only utilized while issue of equity share capital. 

samrendra sir

what are free reserves

Dear Shivani,

Free Reserve are those reserves which are free for distribution as dividend. Free reserves are not made for some specified purpose like Capital redemption reserve