Question

Capital of a company can be called up only in event of winding up

• A. Registered
• B. Issued
• C. Reserve
• D. Revised

Answer 1

Answer:

C. Reserve

The portion of the uncalled capital that can only be called upon during the winding up of the company is termed as Reserve Capital. It is a special category of capital that cannot be called up under normal circumstances.

Key Characteristics of Reserve Capital:

• Creation: It is created when a company passes a special resolution stating that a specific portion of its uncalled subscribed capital will not be called up during its normal course of operations.

• Purpose: It acts as a financial safeguard for creditors. Because it cannot be accessed for regular business use, it guarantees that a specific pool of funds will be available to settle liabilities when the company liquidates.

• Irrevocability: Once a portion of uncalled capital is designated as reserve capital, the decision cannot be reversed or revoked by the company during its active lifecycle.