A corporation may purchase its own shares only out of earned surplus unless the articles of incorporation or the shareholders permit purchase out of capital surplus.

Question

Quizplus · Accepted Answer

Corporations can buy back their own shares using earned surplus, which is the retained earnings or profits of the company. However, they can also use capital surplus (excess funds from issuing shares above par value) if allowed by their articles of incorporation or with shareholder approval, indicating flexibility in financing share repurchases.

A Corporation May Purchase Its Own Shares Only Out of Earned