CAPITAL REDEMPTION RESERVE
CAPITAL REDEMPTION RESERVE?
When
shares are redeemed or bought back, the company is required to either refill
the capital by issuing fresh shares in lieu of the redeemed or bought back
shares or to transfer their funds to an account called the Capital Redemption
Reserve (CRR). As the name
suggests, it is a reserve created when capital is redeemed. In the eyes of
this reserve is treated as capital for all purposes. If company wants to redeem
its shares from partly fresh issue or partly out of divisible profits, then the
balance between redeem and fresh issue should be transferred to capital
redemption reserve. Funds in Capital Redemption Reserve can be used for only
one thing - issue of fully paid up bonus shares. Thus, any amount transferred
to CRR will eventually be converted into share capital.
Comments
Post a Comment