Multiple choice

A transfer to Capital Redemption Reserve is required u/s 55 when preference shares are redeemed

  1. by converting them into new preference shares

  2. by converting them into new equity shares

  3. out of divisible profits

  4. out of fresh issue of shares
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

As per Section 55 of Companies Act.2013,where preference shares are redeemed, otherwise than out of the proceeds of a fresh issue of shares (either equity or prefernce), there shall, out of profits which would otherwise have been available for dividends, be transferred to Capital Redemption Reserve Account, a sum equal to the nominal amount of the shares redeemed.

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