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CS Executive · Setting Up of Business, Industrial and Labour Laws · Conversion of Business Entities

Bharat Traders Unlimited, an unlimited company with share capital, resolves to register as a limited company. Which step does Section 65 of the Companies Act, 2013 permit in the resolution?

Section 65 allows the resolution to provide that a specified portion of uncalled share capital cannot be called up except in a winding up and for its purposes. It may also increase the nominal amount of shares on the same condition. This is called reserve share capital.

  1. AProvide that a specified portion of its uncalled share capital shall not be capable of being called up except in the event and for the purposes of winding upCorrect
  2. BCancel all existing liabilities of members
  3. CConvert all shares into debentures without any condition
  4. DMake the whole share capital callable at any time by the directors

Explanation

Section 65 permits an unlimited company to increase the nominal amount of shares, with the increase callable only on winding up, or to provide that a specified portion of uncalled capital is callable only on winding up. This creates reserve capital. It does not cancel liabilities.

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