The amount of buy back of shares in any financial year should not exceed.....................of the paid-up capital and free reserves.
Answer & explanation
Correct answer: option 4
The correct answer is option 4- 25%.
The following procedures have been laid down for buy back of shares :
(a) The Articles of the Association must authorise the company for the buy back of shares.
(b) A special resolution must be passed in the companies’ Annual General Body meeting.
(c) The amount of buy back of shares in any financial year should not exceed 25% of the paid-up capital and free reserves.
(d) The debt-equity ratio should not be more than a ratio of 2:1 after the buy back.
(e) All the shares of buy back should be fully paid-up.
(f) The buy-back of the shares should be completed within 12 months from the date of passing the special resolution.
(g) The company should file a solvency declaration with the Registrar and SEBI which must be signed by at least two directors of the company.