Question

A public limited company may in the general meeting, resolve to capitalize any part of the amount standing to the credit of any of its reserve accounts, up to the recommendation of the ____________.

• A. managing director
• B. board of directors
• C. financial advisors
• D. shareholders.

Answer 1

Answer: (B)

board of directors

To capitalize profit of the Company and to provide additional shares given to the current shareholders without any additional cost, on the proportionate basis of Shares holded by the members of the Company, the company’s accumulated earnings are not given out in the form of dividends, but are converted into free shares. This is known as capitalisation of reserve accounts. The procedure for capitalisation of reserve account includes holding of a meeting of the Board and on their recommendation any part of the amount standing to the credit of any of its reserve accounts is capitalised.