Calculation of net worth

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Deepika Bhardwaj (Querist)
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11 October 2011 Pursuant to section 3(1)(ga) of the Sick Industrial Companies (Special provisions) Act, 1985, NET WORTH= (Paid up Capital + Free Reserves)

Whereas, Free Reserves are defined as all reserves credited out of the profits and share premium account but not include reserves credited out of re-evaluation of assets, write back of depreciation provisions and amalgamation.

What will be the calculation if the Company has accumulated losses in the balance sheet of the relevant financial year.

Please guide, if we need to deduct accumulated losses from the paid up capital while calculating Net Worth for a particular financial year.

with best regards
Deepika Bhardwaj
Company Secretary

CA RICHA BADALIA

CA RICHA BADALIA (Expert)
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11 October 2011 Ya, you have to deduct accumulated losses.

Deepika Bhardwaj

Deepika Bhardwaj (Querist)
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18 October 2011 The term ‘Sick Industrial Company’ has been defined under the Sick Industrial Companies (Special provisions) Act, 1985 as follows:

“An Industrial company which has at the end of any financial year accumulated losses equal to or exceeding its entire net worth.”

If a Company has as at March 31, 2011:
Paid up capital: 100000
Reserves & Surplus: 0
Accumulated losses: 60000

Please advice will the Company be treated as Sick Industrial Company?

Thanks & regards
Deepika Bhardwaj

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