CS Executive · Setting Up of Business, Industrial and Labour Laws · Conversion of Business Entities
Lotus Ventures, an unlimited company with share capital, resolves to register as a limited company. Which step is permitted under the provision on reserve share capital?
An unlimited company with share capital may provide that a specified portion of its uncalled share capital is not callable except in the event and for the purposes of winding up. It may also increase share nominal value on the same condition.
- AMaking the whole increased capital callable at any time by the Board
- BCancelling all uncalled share capital without any condition
- CProviding that a specified portion of uncalled capital can be called up only in the event and for the purposes of winding upCorrect
- DReducing the nominal value of each share to nil
Explanation
Section 65 allows such a 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. Making the capital callable at any time would defeat this reserve.
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