Question

Reserve capital is that portion of the ______________ capital that can be called only in the event of winding up of the company.

• A. called-up
• B. uncalled
• C. paid-up
• D. subscribed

Hint:

Reserve Capital = Uncalled Capital set aside by special resolution to be called only at winding up. It is also called "Reserve Liability." Remember: It is part of uncalled capital, not called-up or paid-up capital!

Answer 1

The Correct Option is B

We are asked to identify the type of capital that reserve capital refers to.
Step 1: Understand the meaning of reserve capital.
Reserve capital is a part of the uncalled capital of a company which can be called up only in the event of the company being wound up. It is also known as "Reserve Liability."
According to the Companies Act, a company may, by a special resolution, determine that a portion of its uncalled capital shall not be called up except in the event of winding up. This portion is called reserve capital.
Step 2: Recall the types of share capital.

• Authorized Capital: Maximum capital the company can raise.
• Issued Capital: Part of authorized capital offered to public.
• Subscribed Capital: Part of issued capital taken up by public.
• Called-up Capital: Part of subscribed capital called for payment.
• Paid-up Capital: Part of called-up capital actually paid by shareholders.
• Uncalled Capital: Part of subscribed capital not yet called up.
• Reserve Capital: Part of uncalled capital that can be called only at winding up.

Step 3: Analyze each option.

• (A) called-up:
  • Incorrect. Called-up capital is already called for payment; reserve capital is from uncalled portion.
• (B) uncalled:
  • ✓ Correct. Reserve capital is a part of uncalled capital set aside to be called only at winding up.
• (C) paid-up:
  • Incorrect. Paid-up capital is already paid by shareholders; cannot be called again.
• (D) subscribed:
  • Incorrect. Subscribed capital includes both called and uncalled portions; reserve capital is specifically from uncalled part.

Final Answer: (B) uncalled