Go Ad-Free on CAclubindia with Daily Mobile Updates. Subscribe Now!

doubt

sajay kumar (IPCC STUDENT) (162 Points)

18 January 2011

friends,

just watc the following example

in the scheeme of internal reconstuction te share holders are agree to surrender their shares.

with that surrender shares the company discharge the laibility of trade creditors.so with this we are avail the advantage of discharging laibilty of creditors.

and surrendered shares are liability of the company towards share holders. as they are forgonig their shres and with that we dischage th e creditors laibility. so in my opinion the amouont to the extent of surrenderd shraes should be transfered to capital reduction a/c (credit the reduction a/c) is evrey body agree this? if not y?

Reply
Follow
Share

3 Replies

Suresh Prasad (www.aubsp.com) (15630 Points)
Replied 18 January 2011

Originally posted by : sajay kumar
	friends, just watc the following example in the scheeme of internal reconstuction te share holders are agree to surrender their shares. with that surrender shares the company discharge the laibility of trade creditors.so with this we are avail the advantage of discharging laibilty of creditors. and surrendered shares are liability of the company towards share holders. as they are forgonig their shres and with that we dischage th e creditors laibility. so in my opinion the amouont to the extent of surrenderd shraes should be transfered to capital reduction a/c (credit the reduction a/c) is evrey body agree this? if not y?

Surrender of share is an alternative to capital reduction. In this case the share holders volunteer to return some of the shares back to the company along with duly signed transfer deed.

Upgrade to CAclubindia Pro. Subscribe Now!

sajay kumar (IPCC STUDENT) (162 Points)
Replied 19 January 2011

you did t clear the doubt exactly.i am asking is ,should we transfer that amount to capital reduction a/c?

1 Like

Suresh Prasad (www.aubsp.com) (15630 Points)
Replied 19 January 2011

Dear sajay kumar,

Exactly the amount which is forgone by the creditors or other liability holder and the amount of share surrender all these aretrnsfer to Capital Reduction And these amounts are utilised for the set off and write off the P/L debit balance, preliminary exp., FA , CA , Investments etc. and it deals with sec. 100 to 105 of Companies Act, 1956.

surrendered shares are not liability of the company towards share holders but the balance of share surrender after adjusting above items, is transfer to Capital Reserve A/c.