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

Meera Exports Unlimited, an unlimited company having share capital, resolves to register as a limited company. Which action is permitted under the Companies Act, 2013 for providing reserve share capital on this conversion?

The company may provide that a specified portion of its uncalled share capital cannot be called up except in the event and for the purposes of winding up. It may also increase each share's nominal amount on the same condition. This creates 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 uncalled share capital with immediate effect
  3. CConvert all existing shares into debentures of equal value
  4. DProvide that the whole share capital becomes callable at any time at the Registrar's direction

Explanation

Section 65 lets an unlimited company having share capital, by its resolution for registration as a limited company, increase the nominal amount of each share, with the increase callable only in winding up, or provide that a specified portion of uncalled capital is callable only in winding up. Cancelling capital, converting shares or Registrar-directed calls are not provided for.

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