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Capital Redemption Reserve Account

Section 80 expressly provides for the creation of this reserve by capitalizing the divisible profits. The amount to be credited to this account is arrived as follows :

(i)         Where the shares (nominal value only) are redeemed wholly out of the profits which would otherwise be available for dividends (i.e., divisible profits), the amount by which the company’s issued share capital is diminished, shall be transferred to the Capital Redemption Reserve Account.

(ii)      Where the shares are redeemed partly out of the proceeds of a fresh issue made for the purpose of redemption, the amount of the difference between the nominal value of the shares redeemed and the proceeds of fresh issue shall be transferred to the Capital Redemption Reserve Account. Transfers from capital redemption reserve are frozen except for the purpose of issuing fully paid bonus shares.






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