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Caro rules
Dear Experts,
As per the CARO Rules 2003, a private company which has it's paid up capital and Reserves exceeding Rs.50 lacs will come under the virtue of the rules.
A private company which has a paid up capital of Rs.1,00,00,000 and Reserves of Rs.(1,50,00,000)i.e, the net is Rs.(50,00,000).
is CARO applicable because it's combined paid up capital and Reserves doesn't exceed Rs.50 lacs??
Replies (5)
A private limited company, in order to be exempt from the applicability of the Order, must
satisfy all the conditions cumulatively. In other words, even if one of the
conditions is not satisfied, a private limited company’s auditor has to report on the matters specified
in the Order.
conditions are -
a private limited company with a paid-up capital and reserves not more than rupees fifty
lakh and which does not have outstanding loan exceeding rupees ten lakhs from
any bank or financial institution and does not have a turnover exceeding rupees five crores
at any point of time during the financial year. (pls note - limits might have been changed)
thank u sir for ur reply... my question is like whether the both paidup capital and reserves combined should exceed 50 lacs or either of the one. because in my case the paid up capital is exceeding Rs.1 crore, but where as the reserves are in negative like -1.50 crores. when we add them they were in a negative figures.
thank u sir for ur reply... my question is like whether the both paidup capital and reserves combined should exceed 50 lacs or either of the one. because in my case the paid up capital is exceeding Rs.1 crore, but where as the reserves are in negative like -1.50 crores. when we add them they were in a negative figures.
For determining the applicability of the Order to a
private limited company, both capital as well as revenue reserves should be taken into
consideration while computing the limit of rupees fifty lakhs prescribed for paid-up capital and
reserves. Revaluation reserve, if any, should also be taken into consideration while determining the
figure of reserves for the limited purpose of determining the applicability of the Order. The credit
balance in the profit and loss account should also be considered as a part of reserve since the
balance in the profit and loss account is available for general purposes like declaration of dividend.
The debit balance of the profit and loss account, if any, should be reduced from the figure of
revenue reserves only. Therefore, if the company does not have revenue reserves, debit balance
of profit and loss account cannot be reduced from the figures of paid-up capital, capital reserves
and revaluation reserves. For example, if the company has Rs. 40 lakhs of paid up share capital,
Rs. 5 lakhs as Revaluation Reserve, Rs. 6 lakhs in Capital Reserve and Rs. 6 lakhs as debit
balance in the Profit and Loss Account, the amount of Rs. 6 lakhs standing to the debit of Proft and
Loss Account cannot be deducted from the figures of Rs. 11 lakhs, being the total of the
Revaluation Reserve and the Capital Reserve. However, miscellaneous expenditure to the extent
not written off should not be deducted from the figure of reserves for the purpose of computing the
above limit.
I hope it clarifies your doubt.
Combination of paid up capital and Reserves..
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