Question : Choose the correct statement
Option 1: DRR should be transferred to General Reserve after each redemption proportionately.
Option 2: DRR can be transferred to General Reserve after all the debentures have been redeemed.
Option 3: Both 1 and 2
Option 4: None of the above
Correct Answer: Both 1 and 2
Solution : Answer = Both 1 and 2
The Companies Act, 2013 and Rules thereunder prescribe that DRR shall be at least 10 per cent of Outstanding Debentures. Thus, DRR should be transferred to the General Reserve after each redemption proportionately. Alternatively, DRR can be transferred to the General Reserve after all the debentures have been redeemed.
In the absence of any instruction in the question, DRR should be transferred to the General Reserve in proportion to the debentures redeemed.
Hence, the correct option is 3.
