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CS Executive · Capital Market and Securities Laws · Issue of Capital and Disclosure Requirements

Arjun Steels Ltd, a listed company, plans a bonus issue out of reserves. Which reserve CANNOT be capitalised for issuing fully paid-up bonus shares under the Companies Act, 2013 text provided?

Reserves created by revaluation of assets cannot be capitalised to issue bonus shares. The Companies Act allows bonus shares out of free reserves, the securities premium account or the capital redemption reserve account, but its proviso bars revaluation reserves.

  1. ASecurities premium account
  2. BFree reserves
  3. CCapital redemption reserve account
  4. DReserves created by revaluation of assetsCorrect

Explanation

The Act allows bonus shares out of free reserves, the securities premium account or the capital redemption reserve account. The proviso prohibits capitalising reserves created by revaluation of assets. Hence the first three are permitted sources.

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