Distinguish between Capital Redemption Reserve (CRR) and Debenture Redemption Reserve (DRR).

Distinguish between CRR and DRR

Capital Redemption Reserve (CRR)

Legal Provision Applicable: Section 80 of Companies Act.

When to be created: It is created when the redeem able preference shares are redeemed out of divisible profits.

How much to be created: It is created equal to the nominal value of preference shares redeemed out of divisible profits.

Utilization: Roan be utilized only for issuing fully bond bonus shares.

Debenture Redemption Reserve (DRR)

Legal Provision Applicable: Section 117C of Companies Act.

When to be created: It is created before the cornmencernent of redemption of redeemable debentures.

How much to be created: It is created by transferring an adequate profit as per Sec. 117(C) or an amount equivalent to 50% of the amount of debenture issue as per SEBI Guideline.

Utilization: It can be utilized like a free reserve for purposes like payment of dividend issue of bonus shares, etc.