# Section 69: Transfer to Capital Redemption Reserve (CRR)

## When Does Section 69 Apply?

When buyback is made out of Free Reserves (FR) or Securities Premium Account (SPA) — i.e., NOT out of fresh issue proceeds.

## What to Do

Create Capital Redemption Reserve (CRR) equal to the nominal value of shares bought back.
Transfer this amount from Free Reserves / Securities Premium to CRR.

## Use of CRR

CRR can be utilised for issue of fully paid-up bonus shares to members.

## Summary Diagram

```

Buyback Source

+--- Out of Fresh Issue Proceeds ---> No CRR required

+--- Out of Free Reserves / SPA ---> Create CRR (= nominal value of shares bought back)

Use: Bonus shares

```

Worked example

### Example 1

Example 1: A company buys back 10,000 equity shares of face value Rs. 10 each at Rs. 25 each, entirely out of free reserves. Compute the amount to be transferred to CRR.

Answer: Amount to be transferred to CRR = Nominal value × Number of shares bought back = Rs. 10 × 10,000 = Rs. 1,00,000. The premium of Rs. 15 per share is debited to Securities Premium / Free Reserves.

### Example 2

Example 2: If the same company funded the buyback fully out of proceeds of a fresh issue of debentures, what amount goes to CRR?

Answer: Nil. Section 69 requires CRR only when buyback is out of free reserves or securities premium — not from proceeds of a fresh issue.

⚠️ Common exam mistakes

Transferring the full buyback consideration (including premium) to CRR instead of only the nominal value.
Creating CRR even when buyback is out of fresh issue proceeds — Section 69 does not apply in that case.
Forgetting that CRR can only be used for issuing fully paid-up bonus shares, not for any other purpose.

Bare-Act text Section 69 · Companies Act, 2013 · click to expand

Where a company purchases its own shares out of free reserves or securities premium account, a sum equal to the nominal value of the shares so purchased shall be transferred to the capital redemption reserve account, and details of such transfer shall be disclosed in the balance sheet. The CRR account may be applied by the company, in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares.

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Section 69 - Transfer to Capital Redemption Reserve (CRR) on Buyback

Worked example

⚠️ Common exam mistakes