Section 69 of the Companies Act, 2013
Section 69 of the Companies Act, 2013 – Transfer of certain sums to capital redemption reserve account
🔹 Provision Summary:
Section 69 deals with the treatment of proceeds when a company redeems its preference shares. Specifically, it mandates the transfer of an amount equal to the nominal value of the shares redeemed to the Capital Redemption Reserve (CRR) if the shares are redeemed out of profits (and not out of fresh issue of shares).
🔸 Key Points:
When applicable:
When a company redeems its redeemable preference shares out of profits available for distribution as dividends.
Mandatory Transfer to CRR:
An amount equal to the nominal value of the shares redeemed must be transferred to the Capital Redemption Reserve Account (CRR) from the distributable profits.
Nature of CRR:
The CRR is treated like paid-up share capital.
It can only be used for issuing fully paid bonus shares to members.
Restriction on use:
The CRR cannot be used for declaration of dividends or for any other purpose except issuing fully paid-up bonus shares.
📝 Example:
If a company redeems ₹10 lakhs worth of preference shares out of its profits, it must transfer ₹10 lakhs from its free reserves to the Capital Redemption Reserve.
🔍 Related Sections:
Section 55 – Issue and redemption of preference shares
Section 52 – Securities premium account
Section 63 – Issue of bonus shares
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