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CS Executive · Company Law and Practice · Distribution of Profits

Kaveri Engineering Ltd has 1,00,000 equity shares, of which 20,000 are partly paid-up with ₹4 per share still uncalled. It plans a bonus issue. Under section 63(2), what must be true on the date of allotment?

The partly paid-up shares must be made fully paid-up. Section 63(2)(e) lays down that any partly paid-up shares outstanding on the date of allotment have to be made fully paid before the company capitalises profits or reserves to issue fully paid-up bonus shares.

  1. AThe partly paid-up shares must be made fully paid-upCorrect
  2. BThe partly paid shares are excluded and may stay partly paid
  3. CBonus shares may be issued only to holders of fully paid shares
  4. DCalls on partly paid shares can be adjusted against the bonus entitlement

Explanation

Section 63(2)(e) says that partly paid-up shares outstanding on the date of allotment must be made fully paid-up before a company capitalises reserves for bonus shares. Excluding them or adjusting calls against bonus is not provided.

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