Provisions of Section 65 of Companies Act 2013
Updated: Mar 30
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Amended and updated notes on section 65 of Companies Act 2013. Unlimited Company to provide for reserve share capital on conversion into a limited company.
SECTION 65 of the Companies Act 2013 states provisions related to Reserve Capital which a company with share capital should retain to meet the liquidation prerequisites .
Now let's discuss What reserve capital is and Why is it Mandatory to be Maintained?
Reserve Capital is a portion of Subscribed uncalled capital that will be called up at the time of dissolution of the Company.
In other words, it is part of the equity share capital / authorized capital of the Company, which cannot be called up until and unless the Company is on the verge of liquidation.
As it is created out of Authorized Capital, therefore it'll only be utilized for the events (long-term projects, investments, etc.). It is not shown in the Company's balance sheet.
Capital Reserve and Reserve capital are two different concepts. They might seem similar, but in actuality, they are poles apart.
Reserve Capital is created out of Authorized capital and a part of equity share capital used to meet dissolution expenses.
Capital Reserve is created out of Capital gains and utilized to set off capital losses and unforeseen situations and emergencies like inflation.
Corrected and refreshed notes on area 65 of Companies Act 2013. Detailed conversation on arrangements and rules connected with limitless organization to save share capital on change into a restricted organization.
Part IV (Sections 43-72) of the Companies Act, 2013 (CA 2013) manages the arrangements connected with share capital and debentures. Area 65 of CA 2013 allows limitless organizations to hold share capital on transformation into restricted organizations.
Section 65 of Companies Act 2013: Unlimited Company to provide for reserve share capital on conversion into a limited company
Section 65 shall come into force on 12th September 2013 vide Notification No. S.O. 2754(E) dated 12.09.2013.
An unlimited company having a share capital may, by a resolution for registration as a limited company under this Act, do either or both of the following things, namely—
(a) increase the nominal amount of its share capital by increasing the nominal amount of each of its shares, subject to the condition that no part of the increased capital shall be capable of being called up except in the event and for the purposes of the Company being wound up;
(b) provide that a specified portion of its uncalled share capital shall not be capable of being called up except in the event and for the purposes of the Company being wound up.
Recently, we have thoroughly examined segment 64 (Notice to be given to Registrar for change of offer capital) of CA 2013. Today, we got familiar with the arrangements of area 65 of Companies Act 2013 read with the Companies (Share Capital and Debentures) Rules, 2014.
Segment 65 of the Companies Act, 2013 has been told by the Ministry of Corporate Affairs (MCA) vide Notification No. S.O.2754(E) dated 12.09.2013. This warning came into force from twelfth September 2013. For example, the beginning date of area 65 is 12-9-2013.