CA Inter P1 · Chapter 10 · Question 4 of 10
Case: Ishita Ltd bought back 50,000 equity shares of ₹10 each at ₹40 per share, wholly out of its securities premium and general reserve. Under section 69 of the Companies Act, 2013, the amount to be transferred to the Capital Redemption Reserve is:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) ₹5,00,000
Explanation
Section 69 requires that where a company purchases its own shares out of free reserves or securities premium, a sum equal to the nominal value of the shares so purchased is transferred to the Capital Redemption Reserve. Nominal value = 50,000 x 10 = ₹5,00,000. The premium paid of 15,00,000 is adjusted against securities premium/free reserves but is not transferred to CRR.
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