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Redemption Reserve

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Guest (Querist)

21 March 2011 Why CRR and DRR are created?

CA Ravi Sisodia

CA Ravi Sisodia (Expert)

21 March 2011 CRR Pertain to Capital Redemption Reserve fund which is created to secure the creditor & also it is mandatory to create while making the buy back of Share capital,b'coz after buy back the share capital reduce by such amount.(means the owner has paid before the liability being pay of the outsider & this give unsecurity to Creditor, that why it is mandatory to create the same with nominal value of share...)

CRR can be used for as per the Act for Instance... Issue of Bonus share,some extend to the payment of Dividend after approval from Central Government.

DRR is to be created for the payment security of Debenture only.

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