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Conversion of Fully Paid Share into Stock and Stock into Shares

Stock is a consolidation of shares into one divisible unit. When it is impossible for the share capital to be one share, any amount of stock may be transferred. In practice, however, companies restrict the transfer of stock of multiples of, say 100. A company can convert its fully paid shares into stock as per Section 94(c) of The Companies Act, 1956.

Upon the company converting its shares into stock, the accounting entries merely record the transfer from the share capital to the stock account. A separate stock register is used in which details of the members’ holdings are entered and the annual return is modified accordingly.

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