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Capital Reserve in Companies Act, 1956


 Can some one help me in finding out which section in companies act talks about usage of capital reserve ?

 

Rishikesh

 
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Vice President (Corporate)

Pl refer to following Sections:

 

1) Sec.80(5):  Capital Redemption Reserve can be used for issue of bonus shares.

 

2) Sec.80(1): Provisions of reduction of share capital will apply to redemption of preference shares if there is no fresh issue or CRR is not created.

 

3) Sec.78(2):  Use of Securities Premium Account

 

4) Sec.77A(1)(iii):  Use of Securities Premium Account for buy-back of securities.

 

5) Sec.78(1):  Provisions of reduction of share capital will apply to Securities Premium A/c in the given case.

 

6) Sec.117C:  Use of Debenture Redemption Reserve for redemption of debentures only.

 

7) Para 14.4 of AS-10:  Loss on disposal of fixed assets to be charged to Revaluation Reserve Account.

 

Thanks.

 

 

 
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can i have more clarification on capital reserve. can it be treated as free reserve.

 

 
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ARTICLE ASSISTANT


 

Capital reserves are those reserves, which are not created out of operating profit. In other words, these reserves are created out of capital profits. Profit on sale or revaluation on fixedassets is capital profit, which are generally not available fordistribution among the shareholders of the company. The following are some examples of capital profits, which are thesources of creating capital profits which are the sources of creating capital reserves.
  • Profit on sale of revaluation of fixed assets.
  • Profit on repayment of debentures.
  • Profit earned through the issue of shares at premium.
  • Profit earned through forfeiture and re-issue of shares.
  • Profit on the purchase of running business etc.
Utilization of Capital Reserves:
  • To meet future capital losses
  • To issue as fully paid bonus shares
  • To strengthen the financial position of the business.


Total thanks : 2 times

 
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can i know the reserves used for the redemption of debentures, preference shares and buyback

 
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capital reserve used to written off the fixed assets as per part c of companies act 2013

 
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