Skip to content

CS Executive · Company Law and Practice · Introduction to Company Law

Sagar Agro Ltd, an unlimited company with share capital, passes a resolution to register as a limited company. Its shares have a nominal value of Rs 10 each, and it wants to protect creditors by creating a reserve. Which step is permitted by the Act as part of that resolution?

The company may provide that a specified portion of its uncalled share capital shall not be callable except in the event and for the purposes of winding up. This is the reserve share capital allowed by section 65 on conversion to a limited company.

  1. AProviding that a specified portion of its uncalled share capital cannot be called up except in a winding upCorrect
  2. BIncreasing the nominal value of each share so that the increase is callable at any time by the Board
  3. CCancelling all uncalled capital without any further condition
  4. DConverting uncalled capital into debentures automatically

Explanation

Section 65 lets such a company increase the nominal amount of each share, but the increase can be called up only in a winding up, and/or provide that a specified portion of uncalled capital is callable only in a winding up. The option allowing the Board to call the increase at any time ignores this condition.

Did you get it right without looking?

One question tells you little. A timed set on Introduction to Company Law shows your real accuracy, how long you take and where you lose marks.

Practise Introduction to Company LawFree diagnostic mock

More Introduction to Company Law questions