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Capital redemption reserve
Corporate & Other Laws
If it says that we use capital redemption reserve ac for redemption of preference shares,then y do we use it for issuing bonus shares,I am confused here ,what is it actually used for
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Thread Starter
Pramod RajpurohitWts the logic behind opening crr account and using it for bonus shares and redemption of pf shares,and from where does this amount of bonus shares comes from?
When we redeem preference shares, it's basically reduction of capital. We are paying shareholders before creditors get paid. So, for protecting interests of outsiders, law says if we are redeeming preference shares without any new issue of equity shares i.e. we are redeeming preference shares out of profits that we already earned during last year(s), we should transfer some profits to an account that can only be used for bonus issu. That is why we open CRR account. So that free reserves don't get distributed as dividend. We want to restrict their use.
As per Sec 69(2) The company can use the Capital Redemption Reserve to issue the fully paid-up bonus shares. Where did you read that we use capital redemption reserve ac for redemption of preference shares Proviso to Sec 55(2) states Preference shares are redeemed from fresh issue or from free reserves (by creating CRR for the nominal value)
Sudha Reddy
As per Sec 69(2) The company can use the Capital Redemption Reserve to issue the fully paid-up bonus shares. Where did you read that we use capital redemption reserve ac for redemption of preference shares Proviso to Sec 55(2) states Preference shares are redeemed from fresh issue or from free reserves (by creating CRR for the nominal value)
Then y wud d company transfer the amount equal to nominal value to crr,if it does not want to pay for redemption and use it for bonus issue
Assume there was 1lakhs share in the company, while redemption share will come down (assume some 50000) now other shareholders may have this fear ð??¨ ( free reserves are the shareholders money ,but all these are given to some shareholders, ) what they will give to us ? What if the company liquidated ? As a solution for those fears First cCRR created ,from that bonus will given as a compensation Even though the company liquidated first the asset sold will fill the crr (will taken by shareholders) the balance asset sold will be used to settle liability Hope you understand
Thread Starter
Pramod RajpurohitNo I din get u
Wts the logic behind opening crr account and using it for bonus shares and redemption of pf shares,and from where does this amount of bonus shares comes from?
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