Which condition must be met for a reduction of share capital through buybacks?

The correct answer highlights that a special resolution must be passed and the company's articles of association allow for such a reduction of share capital through buybacks. This reflects the corporate governance requirements set out in company law, which stipulates that significant decisions affecting the capital structure of a company require the approval of shareholders through a special resolution.

A special resolution typically requires a higher threshold of approval (usually 75%) compared to ordinary resolutions (which generally require over 50% approval). This ensures that shareholders who may be affected by the reduction of capital have a greater say in the decision, as it might impact their investment and the overall financial health of the company.

Moreover, the articles of association must permit reductions of share capital via buybacks to validate the process legally. If the articles do not allow for such actions, even with a special resolution, the buyback cannot proceed, leading to potential legal challenges and implications.

While approval from ordinary shareholders, majority vote from the board of directors, and review by an external auditor may be important in various contexts related to company decisions and regulatory compliance, they do not specifically address the critical requirements of a special resolution and the enabling provisions in the articles of association necessary for a legitimate reduction of share capital through buybacks.