Accounting - Reduction of Share Capital

Dear Member,

In our company, 99% shares are held by promoters and balance 1% shares are held by Public Share Holders. Recently company received court sanction for reduction of share capital authorising company to extinguish non promoters share ca[ital by paying off fair value to shareholders.

Company's shares are of Rs. 10/- each and fair value is worked out @ Rs. 50/-. In Companies books of accounts, Company is having balance in Capital reserve account, general reserve account and share premium account.

I would like to understand accounting treatment of premium or additinal payment of Rs. 40/- which is being made to share holders. Whether it needs to be charged to P&L account or adjusted against general reserve or capital reserve or share premium account?

Regards

CA Chandrashekhar Laddha

+91 99252 37250

 

Replies (2)

It has to be adjusted with the existing reserves and premium first

Originally posted by : C.JANANI

It has to be adjusted with the existing reserves and premium first

 Hi,

In which order we can adjust additional payment against General Reserve, Share Premium and Capital reserve? Whether we can first use balance in share premium account to adjust? Whether adjustment against share premium account is as per provision of Company Law as balance in share premium account can be utilised only for some specified purpose?

Please advice.

 

Regards

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