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CMA Final · Corporate and Economic Laws · Company Formation and Conversion

Sagar Textiles, an unlimited company with share capital, passes a resolution for registration as a limited company. Which step is permitted by the Companies Act, 2013 in that resolution?

An unlimited company converting to limited 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 nominal share value on the same condition, creating reserve capital.

  1. AProvide that a specified portion of its uncalled share capital cannot be called up except in the event and for the purposes of winding upCorrect
  2. BReduce the nominal amount of each share so that no liability remains on members
  3. CProvide that the entire share capital will be callable at any time at the directors' discretion
  4. DDeclare that existing members will have no liability even in winding up

Explanation

Section 65 lets the company increase the nominal amount of shares (the increase being callable only on winding up) and/or provide that a specified portion of uncalled capital is callable only in winding up. The other options are not provided for and contradict the reserve capital idea.

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