Question:
Reserve capital is that portion of the ______________ capital that can be called only in the event of winding up of the company.
Reserve capital is that portion of the ______________ capital that can be called only in the event of winding up of the company.
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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!
Updated On: Mar 9, 2026
- called-up
- uncalled
- paid-up
- subscribed
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The Correct Option is B
Solution and Explanation
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.
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.
- (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.
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