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Could you explain about capital redemption reserv…

Could you explain about capital redemption reserve?

Could you explain about capital redemption reserve?

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Jeeba Aug. 30, 2018

When a company proposed to redeem preference shares from its profit, a sum equal to the nominal value of shares is to be transferred to a reserve, called the Capital Redemption Reserve Account.

The provisions of the Companies Act, 2013, relating to the reduction of share capital of a company shall apply as if the Capital Redemption Reserve account were paid up share capital of the company.

The Capital Redemption Reserve Account may be applied by the company in paying up unissued share of the company to be issued to members of the company as fully paid up bonus shares.

It should be disclosed under the head "Reserves & Surplus" on the Balance Sheet.